,VOOT 


<&    IS 


PROCEEDINGS 


AT 


Hearing  before  Board  of  Arbitration 


ON    QUESTION    OF 


Canadian  Pacific  Differentials 


AT 


AUDITORIUM  HOTEL,   CHICAGO, 

October  12,  1898. 


DECISION 


OF 


BOARD  OF  ARBITRATION 

(See  Page  201  hereof.) 


COMMITTEE 

REPRESENTING  AMERICAN 

TRANS-CONTINENTAL  LINES. 

CHICAGO,  December  10,  1898. 


In  view  of  the  fact  that  the  Canadian  Pacific  Railway 
Company  has,  through  its  Vice-President,  addressed  to  the 
Executive  Officers  of  the  American  Lines  a  letter,  copy  of 
which  will  be  found  on  the  following  page,  it  has  been  deemed 
proper  by  the  Committee  in  charge  of  the  case  of  the  Ameri- 
can Lines  to  print  and  distribute  the  arguments  as  they  were 
presented  to  the  Arbitrators  in  order  that  the  Railway  Com- 
panies of  the  country  and  the  public  at  large  may  for  them- 
selves judge  the  merits  of  this  case. 

This  is  the  answer  of  the  American  Lines  to  the  unwar- 
ranted inference  of  the  Canadian  Line,  as  stated  in  Vice-Presi- 
dent Shaughnessy's  letter,  that  "the  question  turned  upon  a 
technical  interpretation  of  the  word  'entitled'  which  was  taken 
to  mean  'inherently  entitled'  instead  of  'equitably  entitled." 

Note  that  in  their  submission,  the  American  Lines  stated 
their  construction  of  the  term  "entitled"  to  be  that  — 

'The  term  is  used  relatively,  strictly  in  the  sense  of 

the  term  'equitable  right,'  just  and  right  under  all  the  cir- 

cumstances of  the  particular  case,  fair  and  equal."    (See 

page  86  of  Proceedings.) 

J.  C.  STUBBS, 


B.  CAMPBELL, 


Following  is  a  COPY  of  Vice-President  Shaughnessy's  letter,  referred  to 
on  the  preceding  page. 

"CANADIAN   PACIFIC   RAILWAY  COMPANY. 

MONTREAL,  27th  October,  1898. 
"To  THE  EXECUTIVE  OFFICERS  OF  TRANS- CONTINENTAL  RAILWAY  LINES: 

"We  have  been  notified  of  the  award  of  the  Arbitrators  in  the  matter  of 
freight  differentials  claimed  by  this  Company  between  Eastern  points  and  San 
Francisco. 

"The  decision  of  two  of  the  arbitrators  is, 

•That  the  Canadian  Pacific  Railway  is  not,  nor  should  it  be,  entitled  to  a 
differential  under  the  rates  made  by  the  U.  S.  lines  for  the  carriage  of  the 
freight  in  question/ 

"The  Arbitrators  do  not  mention  the  grounds  upon  which  the  decision  is 
based,  but  we  are  informed  that  the  question  turned  upon  a  technical  inter- 
pretation of  the  word  'entitled'  which  was  taken  to  mean  'inherently  entitled,' 
instead  of  'equitably  entitled.' 

"To  believe  that  the  word  'entitled'  was  introduced  by  the  framers  of  the 
Denver  resolution  in  any  other  than  the  broad  sense  in  which  it  is  used  be- 
tween railways,  would  be  to  believe  them  guilty  of  trickery,  and  we  refuse  to 
entertain  such  a  thought.  We  never  claimed  to  be  inherently  entitled  to 
differentials.  Our  contention  was  based  upon  common  usage  and  upon  the 
practice  prevailing  among  railways  under  similar  circumstances  and  conditions. 

"If  we  be  correctly  informed  that  the  decision  turned  upon  the  interpre- 
tation of  a  word,  and  not  upon  the  evidence  as  presented,  ordinary  fairness 
would  require  a  re-submission  of  the  case  for  determination  upon  its  merits. 
If  the  other  lines  interested  be  unwilling  to  join  in  this  simple  act  of  justice, 
we  have  nothing  to  do  but  submit  to  the  decision  as  rendered. 

"The  question  of  a  differential  having  been  settled,  circumstances  will 
determine  the  best  and  most  expedient  course  for  the  protection  of  this  Com- 
pany's interests. 

"Notwithstanding  the  combinations  for  that  purpose,  the  American  lines 
can  scarcely  expect  to  deprive  us  of  participation  in  inter-state  traffic  while 
they  are  competing  freely  for  the  inter-provincial  traffic  of  Canada,  nor  can 
they  reasonably  complain  if  we  seek  to  make  good  out  of  the  former  what  we 

may  lose  of  the  latter. 

(Signed)         T.  G.  SHAUGHNESSY, 

Vice-President." 


INDICES. 


PAGE 

BOARD  OF  ARBITRATION,  5,  201 

REPRESENTATION,  5 

QUESTION  FOR  CONSIDERATION  OF  ARBITRATORS,  5 

CANADIAN  PACIFIC  RAILWAY  Co.'s  ARGUMENTS,  -             -        8,  158,  183 

AMERICAN  LINES'  ARGUMENTS,  65,  190 

DECISION  OF  ARBITRATORS,      .          -             -  -          -•-•.      •    -        201 


ARGUMENTS  OF  AMERICAN  LINES,  65,  190 

ARGUMENTS  OF  CANADIAN  PACIFIC  RAILWAY  Co.,  8,  158,  183 

BOARD  OF  ARBITRATION,  5,  201 

DECISION  OF  ARBITRATORS,  -  201 
MR.  ROBT.  KERR'S  ARGUMENTS  FOR  CANADIAN  PACIFIC  RAILWAY 

Co.,  •  8,  158 
MR.  T.  G.  SHAUGHNESSY'S  ARGUMENTS  FOR  CANADIAN  PACIFIC 

RAILWAY  Co.,  183 

MR.  J.  C.  STUBBS'  ARGUMENTS  FOR  AMERICAN  LINES,  65,  190 

QUESTION  FOR  CONSIDERATION  OF  ARBITRATORS,  5 

REPRESENTATION,  -  -  -  -  -  -  5 


475488 


PROCEEDINGS 

AT 

HEARING  BEFORE  BOARD  OF  ARBITRATION 

ON 

Question  of  CANADIAN  PACIFIC  DIFFERENTIALS 

AT 

AUDITORIUM  HOTEL,  CHICAGO, 

OCTOBER  12,   1898. 

BOARD  OF  ARBITRATION: 

MESSRS.   W.   A.   DAY,          EDWARD  S.   WASHBURN,         J.   W.    MIDGLEY. 

CHAIRMAN. 


REPRESENTATION: 

AMERICAN  LINES:  CANADIAN  PACIFIC  RAILWAY: 

MESSRS.  J.  C.  STUBBS,  MESSRS.   ROBT.  KERR, 

PAUL  MORTON,  G.  M.  BOSWORTH. 

W.  H.  TRUESDALE, 
B.  CAMPBELL. 


QUESTION   FOR   CONSIDERATION. 

At  a  meeting  of  executive  officers  of  Trans-Continental  lines  held  at 
Brown  Palace  Hotel,  Denver,  Colo.,  on  August  22,  1898,  the  following 
resolution  was  adopted: 

"Resolved,  that  provided  the  Canadian  Pacific  Railway  will 
join  with  the  United  States  Lines  in  a  co-operative  agreement 
designed  to  secure  the  maintenance  of  reasonable  rates  on  the 
freight  traffic  interchanged  with  San  Francisco,  Cal.,  by  other  points 
in  the  United  States  and  Canada,  that  the  lines  here  represented 
will  submit  to  arbitration,  the  question  of  whether  the  Canadian 
Pacific  Railway  is,  or  should  be,  entitled  to  a  differential  under  the 
rates  made  by  the  United  States  lines  for  the  carriage  of  the  freight 
in  question,  and  if  any  differentials,  what  these  differentials  shall 
be.  The  Board  of  Arbitration  to  consist  of  three  members,  one 
to  be  selected  by  the  Canadian  Pacific  Railway,  one  to  be  selected 
by  the  American  lines  interested,  they  two  to  select  a  third,  and 

5 


»       W       *?    44       'ft     *.       o 

i 

that  the  decision  of  two  r:<-ribers  of  said  Board  of  Arbitration 
shall  be  final,  conclusive  and  binding  upon  all." 

Mr.  W.  A.  Day  was  selected  to  represent  the  American  Trans-Con- 
'tinental  lines  on  the  Board  of  Arbitration ;  the  Canadian  Pacific  Railway 
selected  Mr.  J.  W.  Midgley  as  its  representative,  and  Messrs.  Day  and 
Midgley  selected  Mr.  Edward  S.  Washburn  as  the  third  member  of  the 
Board. 


Pursuant  to  the  resolution  above  recited,  a  hearing  before  the  Board 
of  Arbitration  was  arranged  to  convene  at  Auditorium  Hotel,  Chicago, 
October  12,  1898,  at  n  o'clock,  A.  M. 


The  meeting  was  called  to  order  by  Arbitrator  Washburn,  who  offi- 
ciated as  Chairman  of  the  Board. 

The  appointment  of  Mr.  E.  S.  Stephens,  as  Secretary  of  the  Board, 
was  announced. 

ARBITRATOR  WASHBURN— Objection  having  been  made  to 
the  sessions  being  in  public,  it  has  been  decided  that  only  railroad  officials 
will  be  permitted  to  be  present  at  the  hearing. 

The  Board  of  Arbitrators  selected  to  consider  the  question  in  dispute 
between  the  Canadian  Pacific  Ry.  and  the  American  lines  as  regards  dif- 
ferentials in  freight  rates  have  organized  and  are  now  ready  to  proceed 
with  the  case,  but  before  doing  so  we  would  like  an  expression  of  opinion 
from  the  interested  parties  upon  one  point. 

The  resolution  under  which  the  Arbitrators  were  selected  does  not 
limit  or  restrict  the  arbitrators  in  any  way  as  regards  methods  of  gathering 
information  from  which  to  decide  the  case,  and  we  would  like  an  ex- 
pression from  the  interested  parties  as  to  whether  they  prefer  that  we 
should  decide  the  case  upon  the  evidence  and  facts  presented  at  this 
hearing,  or  whether,  if  the  Arbitrators  deem  necessary  after  the  hearing, 
they  shall  obtain  information  through  other  sources.  Also  whether  they 
desire  or  prefer  that  we  should  or  should  not  in  considering  the  question, 
use  any  knowledge  that  we  now  have  of  the  matters  in  dispute.  I  will 
first  call  upon  the  Canadian  Pacific  Ry. 

MR.  KERR — Mr.  Chairman,  we  regard  this  as  a  most  serious  matter, 
and  we  would  like  that  every  means  be  taken  by  the  Arbitrators  to  get 
at  all  the  facts  in  every  way  possible,  not  only  through  the  means  of  such 
facts  as  may  be  presented  here,  but  in  any  other  way  they  choose.  We 
want  full  light  on  the  subject,  and  we  want,  of  course,  as  much  of  the  facts 
as  are  necessary  in  order  to  get  at  a  proper  decision  of  the  question. 
Therefore,  we  think  that  the  Arbitrators  should  be  unrestricted  in  any 


way  and  should  seek  light  from  any  source  in  order  to  guide  them  to  a 
proper  decision.  Our  idea  with  regard  to  the  procedure  might  be  this: 
We  would  like  after  putting  in  our  oral  evidence  here  to  have  the  privilege 
of  later  submitting  our  full  written  statement  in  order  that  nothing  may 
be  left  uncovered.  Sometimes  in  excitement  of  a  discussion  points  are 
left  out  here  and  there,  which  afterwards  in  other  moments  we  see  and  we 
would  like  the  opportunity,  if  after  the  close  of  the  hearing  it  seems 
advisable,  to  put  in  a  written  statement  of  our  case. 

ARBITRATOR  WASHBURN— Now,  we  will  ask  the  representa- 
tive of  the  American  lines,  if  they  have  any  preference  on  the  points  I 
have  stated. 

MR.  STUBBS — If  the  Board  please,  this  question  is  submitted  on  a 
resolution  passed  at  a  meeting  of  the  lines  interested.  The  American 
lines  and  the  Canadian  line.  That  resolution  states  two  questions  that 
are  to  be  determined  by  this  Board.  We  think  that  it  should  be  sub- 
mitted and  received  by  the  Board  of  Arbitrators  at  this  hearing.  It  is,  as 
Mr.  Kerr  has  well  stated,  a  very  serious  question;  at  the  same  time  it  is 
not  a  new  question.  It  is  not  a  new  question  to  the  parties  in  contention. 
It  is  not  a  new  question  to  the  members  of  the  Board.  We  have,  after 
a  good  deal  of  wrangling  among  ourselves,  finally  reached  the  conclusion 
that  there  was  but  one  way  to  determine  this  matter.  That  is  by  referring 
it  to  a  Board  of  three  disinterested  arbitrators,  before  whom  we  should 
appear  and  make  our  showing  for  or  against,  as  it  may  be,  the  questions 
stated  in  4hat  resolution. 

At  the  original  meeting  where  this  arbitration  was  decided  upon  it 
was  manifest  to  all  that  it  was  so  important  that  we  ought  to  get  it  out  of 
the  way  as  soon  as  possible.  We  contemplated  there  that  we  might  get 
this  before  the  Arbitrators  and  possibly  reach  a  decision  previous  to 
October  loth,  day  before  yesterday,  so  that  following  the  determination 
of  this  Board  we  might  go  about  intelligently  to  adjust  the  rates  and  get 
upon  a  reasonable  working  relation  that  would  be  conducive  to  harmony 
and  peace,  just  so  far  as  that  is  possible  between  competing  lines,  but 
to  follow  the  suggestion  of  the  Canadian  Pacific  representative  would 
make  this  an  interminate  contest.  It  would  hardly  be  just  to  either  side. 
We  believe  that  if  after  the  statement  made  here  the  Board  should  feel 
that  it  required  testimony  in  support  of  statements  of  alleged  facts  or 
should  want  further  light  upon  the  subject,  they  certainly  could  call  upon 
the  parties  to  appear  and  give  that  evidence,  or  produce  the  information, 
but  I  believe  I  express  the  view  of  the  Committee  in  charge  of  the  Ameri- 
can lines'  case  when  I  say  that  if  it  is  possible  we  should  close  the  matter 
here  and  get  it  out  of  the  way.  For  my  own  part,  it  seems  to  me  that 
the  questions  are  clearly  and  explicitly  stated  in  the  resolution.  What 
we  have  to  submit  to  this  Board  is  there  stated.  There  is  no  roving  com- 
mission at  all. 


8 

ARBITRATOR  WASHBURN— As  there  is  a  difference  of  opinion 
between  the  contending  parties,  this  is  a  matter  that  the  Board  will  have 
to  determine  later;  but  we  hope  that  all  the  evidence  that  will  be  neces- 
sary will  be  produced  at  this  hearing. 

At  a  preliminary  meeting  of  the  Board  yesterday,  to  determine  modes 
of  procedure,  and  so  forth,  it  was  decided  that  we  would  not  adopt  any- 
thing more  than  necessary  to  bring  the  matter  properly  before  the  Board, 
and  it  was  decided  that,  as  the  Canadian  Pacific  Ry.  has  the  affirmative 
side  of  this  question,  that  company  will  open  the  case;  that  the  American 
side  will  then  reply,  and  that  the  Canadian  Pacific  will  close  the  case; 
but  only  in  their  closing  argument  to  answer  points  made  by  the  Ameri- 
can lines,  not  to  introduce  anything  new.  It  was  also  decided  to  call 
upon  the  parties  to  the  controversy,  to  present  each  its  case  in  full,  and 
make  a  full  disclosure  of  its  case  in  the  arguments  that  will  now  be  made. 

We  will  now  call  upon  the  Canadian  Pacific  Ry. 


MR.  KERR — Mr.  Chairman,  I  will  not  take  up  the  time  of  the  Arbi- 
trators in  any  preliminary  remarks,  oratorical  display,  and  all  that  sort  of 
thing,  even  though  I  were  equal  to  it.  It  is  not  applicable  to  the  subject 
nor  to  the  time  and  place. 

The  general  principle  of  granting  differentials  to  broken  rail-and-water 
routes  is  admitted  and  applied  as  between  American  lines  in  various 
sections  of  the  United  States,  as  being  the  only  means  left  under  the  law 
\vhereby  weak  routes  may  obtain  a  share  of  business,  the  law  not  permit- 
ting an  agreement  or  combination  whereby  either  physical  division  of 
tonnage  may  be  made  or  a  money  pool,  or  any  other  grounds  upon  which 
broken  rail-and-water  lines  can  obtain  a  reasonable  proportion  of  the 
traffic,  as  against  direct  rail  line  competitors.  This  being  the  case, 
numerous  rail-and-water  lines  have  been  granted  and  for  years  have 
worked  under  differential  rates  as  against  their  all-rail  competitors. 

Later,  I  propose  to  show  the  great  number  in  extant  and  the  universal 
custom,  law  and  rule,  prevailing  throughout  the  whole  United  States 
and  Canada,  whereby  broken  routes,  rail-and-water,  ocean-and-rail,  river- 
and-rail,  all  have  differential  rates  in  order  to  enable  them  to  compete  with 
their  direct  rail  rivals.  I  will  go  into  the  detail  of  this  matter  later  on.  I 
am  now  only  sketching  generally,  the  principle. 

The  history  of  the  Canadian  Pacific  differentials  extends  over  a  period 
of  ten  years.  On  November  5th,  1887,  a  meeting  of  the  chief  traffic 
officers  of  the  Trans-Continental  lines  was  held  at  the  Grand  Pacific 
Hotel,  Chicago,  at  which  it  was  decided  to  organize  an  association  to  be 
called  the  Trans-Continental  Association,  the  organization  to  take  effect 
December,  1887.  The  meeting  adjourned  to  meet  in  New  York  for 
the  purpose  of  having  conference  with  the  representatives  of  the  Canadian 


Pacific  Railway  Company,  which  was  had,  and  resulted  in  an  agreement 
on  certain  differentials  in  favor  of  that  road.  On  November  28th,  2Qth 
and  3Oth,  a  general  meeting  was  held  in  Chicago  where  through  rates 
were  agreed  upon,  and  some  of  the  Canadian  Pacific  differentials  were 
fixed.  The  first  differentials  fixed  ran: 

From  i       2       3       4       56       7       8      9  10  n   12  13  14  classes 

New  York  30  25  20  15  15  12  12  10  7  5  5  5  5  5  cents 
Chicago  20  15  12  12  12  10  9  8655555 

The  eastbound  differentials  from  San  Francisco  to  New  York  and 
Chicago  were  fixed  on  the  same  figures.  A  meeting  was  held  at  St. 
Louis  on  Dec.  I9th,  1887,  when  the  question  of  differentials  for  the 
Canadian  Pacific  Ry.  to  Detroit,  Toledo  and  Buffalo  not  having  previously 
been  decided  on,  the  Chairman  was  authorized  to  base  the  differentials 
for  Buffalo  by  making  the  Buffalo  rate  for  them  90  per  cent  of  the 
New  York  rate,  and  Toledo  and  Detroit  85  per  cent  of  the  New  York 
rate.  Then  the  question  of  the  Canadian  Pacific  differentials  on  business 
between  St.  Paul  and  Minneapolis  and  San  Francisco  was  brought  under 
discussion  when  the  following  differentials  were  allowed  to  the  Canadian 
Pacific  from  St.  Paul: 

i       2       3      4       56789&  lower       classes 
15     12     10     10     10    8     8     7  5  cents 

The  Northern  Pacific  Ry.  claimed  the  same  differentials  through 
Tacoma  by  rail-and-water  and  their  claim  was  allowed  and  agreed  to. 
In  connection  with  the  formation  of  the  Association  an  agreement  was 
made  with  the  Pacific  Mail  Panama  Route  whereby  certain  space  was 
rented  in  their  steamers;  the  Association  agreed  to  fill  such  space  or  to 
pay  for  it  if  not  filled,  the  Pacific  Mail  agreeing  that  the  Pacific  Coast 
rates  should  be  controlled  by  the  American  roads. 

On  May  I7th,  1888,  a  meeting  was  held  in  San  Francisco,  when  owing 
to  the  differentials  awarded  to  the  Canadian  Pacific  Ry.,  not  giving  that 
company  a  reasonable  share  of  the  traffic,  they  applied  for  an  increase  of 
differentials  to  the  basis  of  40  cents  on  first  class  and  10  cents  on  loth 
class  and  lower  between  San  Francisco  and  New  York.  A  committee 
was  appointed  to  consider  the  question,  and  brought  in  the  following 
report : 

"Resolved,  that  it  is  the  sense  of  our  committee  that  the  differ- 
entials allowed  the  Canadian'  Pacific  Railway  Company  should  at 
all  times  be  fixed  upon  such  a  basis  as  will  secure  to  that  Company 
a  fair  and  reasonable  share  of  the  overland  tonnage,  and  that  if 


10 

the  present  figures  do  not  accomplish  that  result,  they  should  be  so 
modified  as  to  bring  it  about.  To  this  end  the  Chairman  is 
authorized  to  negotiate  for  the  American  Lines  with  the  Canadian 
Pacific  Railway  Company  and  make  such  changes  from  time  to 
time  as,  in  his  judgment,  are  warranted,  with  the  understanding 
that  the  same  differentials  shall  apply  to  St.  Paul  and  Minneapolis 
traffic  via  the  Northern  Pacific  as  may  be  awarded  the  Canadian 
Pacific  Railway  Company;  it  being  understood  that  these  differen- 
tials shall  apply  via  the  Ocean  routes  only." 

This  report  was  adopted. 

Now,  gentlemen,  here  was  a  principle  that  was  evolved  by  this  Com- 
mittee right  in  the  early  history  of  our  connection  with  the  Trans-Con- 
tinental Association  that  is  very  irpportant.  This  Committee,  consisting 
of  representatives  of  the  Southern  Pacific  Company,  the  Atchison,  Topeka 
&  Santa  Fe  Company  and  the  Northern  Pacific  Company  advanced  and 
accentuated  in  this  formal  resolution  and  report  to  the  general  meeting 
of  the  Association,  that  the  differentials  allowed  the  Canadian  Pacific 
Railway  Company  should  at  all  times  be  fixed  on  such  a  basis  as  will 
secure  to  that  company  a  fair  and  reasonable  share  of  the  overland  ton- 
nage. I  would  like  the  minds  of  the  Arbitrators  to  dwell  somewhat  upon 
this,  in  view  of  the  fact  that  of  late  years  we  have  been  chased  and  harried 
in  various  ways  in  order  either  to  force  our  company  out  of  the  business 
of  this  country,  or  to  give  up  our  differential  rates.  Of  course,  the  one 
means  the  other.  If  we  have  to  surrender  the  small  money  advantage 
that  we  now  have  to  offer  in  order  to  secure  a  reasonable  tonnage  to 
our  line,  as  an  offset  to  the  broken  character  of  our  route,  then,  if  you 
do  say  we  shall  not  have  these  differentials,  you  say,  in  the  same  breath 
that  the  Canadian  Pacific  Company  shall  withdraw  from  the  trade  of 
the  United  States,  and  in  doing  that,  of  course,  you  will  remove  a  com- 
petitor; you  will  remove  a  line  that  can  be  fairly  claimed  to  have  done 
good,  and  is  of  advantage  and  great  advantage,  to  the  commerce  of  the 
United  States. 

I  do  not  think  that  is  a  desirable  object  to  attain,  and  we  have  a 
great  deal  of  confidence,  gentlemen,  that  you  will  not  lend  yourselves  to 
attaining  any  such  object. 

This  report  of  the  Committee  that  I  have  just  read  was  duly  adopted 
in  the  general  meeting,  giving  the  Chairman  authority  to  arrange  with 
the  Canadian  Pacific,  for  an  arrangement  and  re-arrangement,  from  time 
to  time,  of  their  differentials,  in  order  that  they  shall  have  a  fair  and 
reasonable  share  of  the  overland  tonnage,  and  the  Chairman  finding  that 
the  Canadian  Pacific  was  justified  in  their  application  for  an  increase  of 
differentials,  granted  the  same,  and  they  were  accordingly  increased  to 
the  following  basis: 


II 

From  123456789      10        classes 


New  York 

40 

35 

25 

2O 

20 

15 

15 

12 

IO 

74 

cents 

Buffalo 

32 

27 

23 

18 

18 

H 

H 

ii 

9 

7 

M 

Detroit 

30 

25 

21 

17 

17 

13 

13 

IO 

8 

7 

tt 

Chicago 

25 

21 

17 

H 

H 

ii 

ii 

9 

7 

7 

tt 

St.  Paul 

1 

Minneapolis 

f15 

12 

IO 

IO 

IO 

8 

8 

7 

5 

5 

ARBITRATOR  DAY— Mr.  Kerr,  what  year  was  that,  if  you  please? 

MR.  KERR— That  was  in  1888.  On  May  I7th,  1888,  was  when  the 
San  Francisco  meeting  was  held  at  which  the  differentials  were  changed. 

ARBITRATOR  DAY— What  was  the  name  of  the  Association? 

MR.  KERR— Trans-Continental  Association. 

The  eastbound  differentials  were  practically  the  same  with  apparently 
some  slight  changes.  Eastbound  to  Chicago — I  do  not  know  why  that 
was,  but  Chicago  appears  here  on  the  record  eastbound  as  first  class  24 
cents,  second  class,  19,  third  class,  16,  fourth,  15,  fifth,  13,  sixth,  13,  sev- 
enth, 13,  eighth,  10,  ninth,  9  and  tenth,  7.  There  is  a  variation  here  in 
first  and  second  class  and  third  class  and  fourth  class.  This  differential 
was  worked  under  until  July,  1889,  when  at  a  meeting  held  in  Chicago  be- 
ginning July  2oth,  the  Southern  Pacific  Company  moved  for  a  reduction 
of  the  Canadian  Pacific  differentials,  they  claiming  we  had  carried  an 
undue  proportion  of  wool  from  California, — from  San  Francisco  to  the 
east.  After  considerable  discussion  pro  and  con  they  proposed  and  we 
accepted,  the  following  reduced  differentials: 

Between 

San  Francisco     i         2        345        ABCDE  classes 
and 


St.  Paul 

No  change 

Chicago 

'7* 

Hi 

12 

IO 

IO 

8 

8 

7 

5 

5 

cents 

Detroit 

21 

17 

14 

II 

II 

9 

9 

7 

5 

5 

it 

Pittsburgh 

22 

18 

15 

12 

12 

ioj 

IOJ 

8 

7 

5 

" 

Atlantic  S'b'd 

28 

24 

17 

H 

H 

12 

12 

8 

8 

5 

tt 

Wool  in  grease — 7^  cents. 

It  will  be  noted  that  the  understanding  on  which  these  differentials 
were  granted  was  that  if  they  gave  the  Canadian  Pacific  an  undue  propor- 
tion of  tonnage  the  differentials  should  be  reduced,  as  soon  as  it  could 
be  ascertained,  to  a  point  that  would  give  that  company  a  reasonable 
traffic.  On  the  other  hand,  if  the  differentials  as  agreed  upon  did  not 
give  it  a  fair  amount  of  traffic  then  they  should  be  increased  by  agree- 
ment, as  soon  as  possible,  to  a  point  that  would  accomplish  that  end. 
Therefore,  the  Canadian  Pacific  Company  entered  the  Association  on 


12 

differentials  that  after  a  fair  trial  did  not  give  them  a  reasonable  amount 
of  business,  and  on  application  the  Trans-Continental  lines  allowed  them 
an  increase. 

Again,  in  July,  1889,  it  being  claimed  that  the  increased  differentials 
gave  the  Canadian  Pacific  an  undue  proportion  of  traffic,  a  change  was 
again  made  in  order  to  hold  their  proportion  of  tonnage  at  the  proper 
figure;  the  first  differential  being  fixed  to  run  for  three  months.  Sub- 
sequently, they  were  extended  to  October  ist,  1890,  and  as  a  matter  of 
fact  did  extend  until  the  end  of  the  year.  In  the  year  1891,  a  new  propo- 
sition was  made  by  the  American  lines  to  the  Canadian  Pacific,  whereby 
the  latter  was  to  receive  an  allowance  in  lieu  of  their  differentials.  This 
allowance  arrangement  lasted  through  the  year  1891,  when  the  Canadian 
Pacific  again  reverted  to  their  differentials,  by  resolution  of  the  Asso- 
ciation at  the  New  York  meeting,  January  I4th,  1892.  At  the  end  of 
1892,  the  Trans-Continental  Association  was  dissolved  and  the  Canadian 
Pacific  adopted  the  basis  of  10  per  cent  differentials,  concluding  that 
to  be  the  fairest  basis  on  which  to  work,  as  it  had  been  demonstrated 
during  the  life  of  the  Association  that  fixed  arbitrary  differentials  did 
not  work  to  the  satisfaction  of  any  one,  but  were  a  constant  source  of 
discussion  and  re-arrangement;  therefore,  by  adopting  the  present  scale, 
it  being  elastic,  moving  upwards  or  downwards  with  the  regular  changes 
in  rates,  the  Canadian  Pacific  concluded  it  would  prove  much  more 
satisfactory  than  the  other  plan  of  fixed  differentials.  Therefore,  before 
entering  the  Association,  we  worked  on  the  percentage  plan.  While 
in  the  Association  we  worked  on  the  fixed  arbitrary  plan — specific — so 
many  cents  per  hundred  pounds,  which  was  not  satisfactory  to  anybody. 
During  the  years  1888  to  1892,  inclusive,  that  question  of  differentials 
was  never  quiet;  not  that  the  Association  lines, — the  American  lines — 
were  unwilling  that  we  should  have  a  differential,  not  that  they  fought  on 
the  principle  of  our  having  or  not  having  a  differential,  but  the  question 
was  always,  on  their  side,  that  we  were  getting  too  much,  and  on  our 
side,  that  we  were  getting  too  little.  Therefore,  our  experience  in  that 
respect,  and  I  think  the  experience  of  most  all  the  lines  who  are  differ- 
ential lines,  or  who  have  to  deal  with  differential  lines,  is  that  the  fixed 
differential  is  a  source  of  worry  and  trouble  all  the  way  through,  and 
that,  if  an  equitable  percentage  could  be  struck  which  will  rise  and  fall 
with  the 'rates,  it  is  more  satisfactory,  more  proper  and  right  than  strug- 
gling with  a  fixed  arbitrary  figure  that  stands  rigid  under  all  conditions 
and  creates  trouble  all  the  way  through. 

At  the  end  of  1892  the  Trans-Continental  Association  was  dissolved, 
and  since  that  time,  having  adopted  this  elastic  scale  of  percentage,  we 
have  worked  very  close,  and  you  might  say  as  harmoniously  as  possible 
for  rival  lines  to  work  together,  although  not  now  being  in  any  of  the 
Bureaus  or  Associations  that  are  at  present  in  existence.  At  every  meet- 


13 

ing  of  the  lines  comprising  the  Trans-Continental  Freight  Bureau  we  are 
represented.  We  are  there  by  invitation,  which  is  always  sent  and  always 
responded  to.  We  are  there  and  sit  in  their  meetings  to  discuss  and  give 
our  views  and  we  have  always  worked  with  the  most  perfect  harmony.  We 
have  simply  gone  along  taking  our  differentials  of  10  per  cent  which  has 
been  practically  undisputed  until  within  a  recent  period  when  it  seemed 
to  have  become  a  burning  question  with  some  of  our  friends. 

The  California  lines  in  order  to  carry  on  their  business  formed  the 
Trans-Continental  Freight  Rate  Committee  in  1893;  the  Northern  Pa- 
cific, Great  Northern  and  Canadian  Pacific  not  being  members.  That 
Committee  comprised  what  is  known  as  the  California  lines.  The  Cana- 
dian Pacific,  Northern  Pacific  and  the  Great  Northern  were  not  mem- 
bers but  they  kept  in  touch  with  the  Freight  Rate  Committee  through 
the  medium  of  the  Union  Pacific,  by  which  means  they  received  prompt 
information  of  the  changes  in  rates,  and  were  enabled  to  govern  their 
rates  accordingly  and  prevent  misunderstandings  and  needless  reduction 
in  revenue.  . 

This  Freight  Rate  Committee  was  dissolved  in  1897  and  the  Trans- 
Continental  Bureau  took  its  place  with  the  Northern  Pacific  and  Great 
Northern  as  members.  The  Canadian  Pacific  did  not  join  the  Freight 
Bureau,  but  worked  in  harmony  with  the  members  of  the  Bureau;  at- 
tended all  their  meetings  by  special  invitation,  and  governed  its  rates 
by  the  rates  made  by  the  Bureau,  on  the  basis  of  10  per  cent  differentials. 
Then,  in  pursuance  with  this  very  interesting  history  of  the  Canadian 
Pacific  in  connection  with  the  Trans-Continental  Association  we  have  to 
drop  back  a  year.  In  March,  1896,  a  meeting  of  all  Trans-Continental 
lines,  including  the  Canadian  Pacific,  was  held  at  the  Windsor  Hotel, 
New  York,  and  an  agreement  made  for  the  formation  of  a  new  association. 
Subsequently,  a  further  meeting  was  held  in  Milwaukee,  in  April,  where 
all  details  pertaining  to  the  formation  of  the  association  were  completed, 
and  rates  were  checked  in  by  the  Freight  Committee.  But  eventually  all 
proceedings  were  stopped  owing  to  the  objection  of  the  Receivers  of  the 
Union  Pacific. 

Now,  that  is  the  general  history  or  sketch  of  the  relations  the  Cana- 
dian Pacific  Company  has  borne  to  the  other  Trans-Continental  lines, 
both  inside  and  outside  of  their  Associations  and  Bureau.  I  do  not 
know  that  there  is  very  much  for  me  to  dwell  on  in  that  history  and 
I  will  now  proceed  to  deal  with  the  question  of  differentials  as  applied 
in  other  sections  of  the  country,  showing  that  not  only  is  the  principle 
of  differentials  admitted  and  acted  upon,  but  that  there  are  strong  prece- 
dents, very  strong,  that  support  us  in  our  contention  that  neither  the 
Canadian  Pacific  line  nor  any  other  broken  line  of  like  character  can  hope 
to  participate  in  any  reasonable  share  or  portion  of  traffic  in  competition 
with  their  direct  all-rail  rivals — the  rail  lines  being  almost  exclusively 


H 

shorter  in  distance,  I  think  in  every  case, — there  may  be  an  odd  excep- 
tion, but  I  think  I  am  right  in  the  general  statement,  in  every  case  the 
rail  lines  are  shorter.  The  time  is  shorter  with  the  exception  of  two 
ocean-and-rail  lines  that  I  shall  refer  to  later  on. 

In  proof  of  the  general  principle  of  differentials  as  admitted  and 
worked  under  as  between  numerous  American  lines  operating  both  in 
water  and  rail  routes,  we  submit  a  list  of  those  now  in  operation.  All 
the  established  lake-and-rail  lines  operating  steamers  on  Lakes  Huron, 
Michigan  and  Superior,  have  differential  rates  allowed  them  as  against 
the  all-rail  lines,  between  the  East  and  Milwaukee,  Chicago,  Duluth,  St. 
Paul,  Minneapolis  and  points  beyond.  The  character  of  those  lines  is 
undoubtedly  very  familiar  to  you  and  I  doubt  whether  it  is  worth  while 
for  me  to  take  up  your  time  or  burden  you  with  an  enumeration  of  those 
various  lines.  They  are  very  numerous  and  they  supply  a  daily  service — 
I  do  not  think  there  is  a  day  during  the  season  of  navigation  but  what 
steamers  leave  Buffalo  for  Lakes  Michigan,  Huron  and  Superior,  so 
that  the  water  carriers  on  the  Lake  supply  practically  a  daily  service 
during  that  season  of  the  year.  These  lines  operate  rail  between  the 
Atlantic  Coast  points  to  the  lakes,  thence  by  steamer  and  then  rail  again 
wherever  they  are  going  to.  Now  the  differentials  accorded  to  these 
lake-and-rail  lines  as  against  their  all-rail  rivals  average  from  28  to  20  per 
cent  below  the  all-rail  rates.  At  present  the  tariff  rates  from  New  York  to 
Chicago  are: 

123      4      5      6     classes 

All-rail  75     65     50     35     30     25     cents  per  100  Ibs. 

Lake-and-rail        54    47     37     27     23     20 

showing  a  range  of  differentials  of  from  21  cents  per  100  Ibs.  on  first 
class  to  5  cents  on  sixth,  equal  to  the  percentage  I  have  just  named, — 28 
to  20  per  cent.  Also,  the  routes  of  the  Atlantic  Port  lines  have  a  differ- 
ential. Their  rates  are  first  class,  65;  second,  57;  third,  44;  fourth,  31; 
fifth,  26,  and  sixth,  22,  showing  a  differential  of  10  cents  on  first  class  to 
3  cents  on  sixth,  being  a  range  equal  to  13  1-3  to  12  per  cent  differentials. 

ARBITRATOR  MIDGLEY— What  do  you  mean  by  Atlantic  Port 
lines? 

MR.  KERR — The  lines  that  operate,  say,  from  New  York  to  New 
London,  Ct.,  by  ocean  and  thence  by  rail. 

The  present  published  rates  from  New  York  to  Texas  common  points 
are: 

i       2       3       45ABCDE  classes 

All-rail  190  158  133  113  89  95  85  73  60  52  cents 

via  Atlantic  Port  lines      170  143  121   100  84  91  78  66  54  45      " 

The  differentials  allowed  to  Atlantic  port  lines  between  New  York 
and  Texas  common  points  range  from  20  cents,  first  class,  to  7  cents 


15 

un  Class  "E,"  equal  to  from  IO-J  to  nearly  13^,  or  13.46  per  cent.  Then 
the  rates  via  Gulf  port  routes  are  still  lower,  running: 

i         2         3        45ABCDE  classes 
155     J33     JI3     I03     79    86     75     63     50    42  cents 

the  differential  ranging  from  35  cents,  on  first  class,  to  10  cents  on  class 
"E,"  equal  to  from  19.23  per  cent  to  18.42  per  cent. 

ARBITRATOR  DAY— Who  enjoys  that  differential? 

MR.  KERR — The  broken  water-and-rail  routes  as  against  all-rail- 
routes  from  New  York  to  Texas  common  points. 

Then  we  have  rates  to  Vicksburg  and  Natchez,  via  Atlantic  port 
routes.  I  am  reaching  around  here,  gentlemen,  in  order  to  show  you 
the  ramifications  and  extent  of  country  over  which  these  differentials 
are  applied,  apparently  all  over,  and  as  we  hold  rightly,  so  it  should  be 
in  the  case  of  broken  routes  that  have  to  contend  with  all-rail  routes. 

The  rates  to  Vicksburg  and  Natchez  are: 

i        23456    classes 

via  Atlantic  Port  Routes  100    90     75     61     50    42  cents 

via  Gulf  Port  Routes  86     81     68     56    46    41      " 

showing  apparently  a  difference  or  differential  in  favor  of  Gulf  Port 
routes  as  against  Atlantic  Port  routes  of  from  14  cents  on  first  class  to  5 
cents  on  fourth,  and  i  cent  on  sixth  class;  the  percentage  range  being 
from  14  per  cent  to  8  per  cent  and  2.38  per  cent.  That  is  the  high  and 
the  middle  and  the  lowest. 

Then  we  have  a  large  number  of  lines  operating  to  and  from  New 
York,  Boston,  Baltimore  and  Portland,  Me.,  via  Ocean-and-rail,  as  fol- 
lows : 

The  National  Despatch;  Canada  Atlantic;  from  New  York  via  ocean 
to  New  London,  Ct.,  thence  rail.  The  Baltimore  &  Ohio  Railroad;  Can- 
ada Atlantic;  Canadian  Pacific  Despatch;  Cumberland  Gap  Despatch; 
Kanawha  Dispatch;  National  Despatch;  Norfolk  and  Western  Despatch; 
Rome,  Watertown  &  Ogdensburg  Line,  from  Boston  and  Common 
Points,  via  ocean-and-rail. 

Then  the  Cumberland  Gap  Despatch — the  same  Despatches  really— 
Kanawha  Despatch;  National  Despatch;  Norfolk  and  Western  Despatch 
from  Boston  via  ocean-and-rail.  Rome,  Watertown  and  Ogdensburg 
Line;  Great  Eastern  Line;  Canadian  Pacific  Despatch,  from  Portland, 
Me.,  and  points  taking  Portland  rates. 

From  New  York,  Boston  and  Portland  (Me.),  the  differentials  allowed 
these  lines  are — that  is  ocean — from  the  starting  point  of  the  goods  to 
the  connecting  point  with  the  rail,  thence  rail  to  destination — the  differ- 
ential allowed  these  lines  is: 


i6 

i        23456     classes 
10      8      6      4      4      3       cents 

the  percentage  ranging  from  31-3  per  cent  to  12  per  cent. 

In  order  to  accentuate  this  differential  question,  and  to  show  and 
prove  its  general  application  and  acceptance,  we  find  here  in  the  Joint 
Traffic  Association  proceedings  of  the  Board  of  Managers,  Sept.  I5th, 
1898,  Rule  184,  "Differentials  Westbound,  via  the  Chesapeake  &  Ohio 
Railroad,  Norfolk  &  Western  Railroad  and  Baltimore  &  Ohio  Railroad," 
which  states: 

"At  a  conference  between  Messrs.  O.  G.  Murray  and  Albert 
Fink,  April  27th,  1889,  it  was  agreed  that  the  following  differentials 
below  the  established  all-rail  tariffs  should  be  used  by  the  Chesa- 
peake &  Ohio  Railway,  via  their  water-and-rail  line  on  insured 
bills  of  lading: 

From  123456       classes. 

Boston  and  New  York  10    8     6    4    4    3  cents  per  100  Ibs. 
Philadelphia  864322      " 

Baltimore  864322      " 

Then  it  goes  on  to  state  that  this  order  or  resolution — rule  it  is  called 
— the  above  differentials  shall  be  subject  to  change  from  time  to  time  when 
either  party  calls  for  a  change,  and  that  the  statistics  of  the  relative  amount 
of  tonnage  forwarded  via  the  several  lines  shall  be  the  basis  of  adjusting 
differentials  from  time  to  time  in  case  of  disagreement.  In  case  of  dis- 
agreement the  question  shall  be  decided  by  arbitration. 

The  foregoing  water-and-rail  differentials  are  also  applied  from  all 
the  cities  named  via  the  Norfolk  &  Western  Railroad,  and  from  Boston 
via  the  Baltimore  &  Ohio  Railroad,  and  to  points  west  of  71  per  cent 
points. 

Then,  under  Rule  No.  185,  we  have  differentials  from  Boston  via 
ocean-and-rail  routes  to  Pittsburgh,  and  so  forth,  treated  of,  and  it  reads: 

"The  following  agreement  was  reached  at  a  conference  held 
October  2Oth,  1893,  between  the  Boston  Freight  Committee  and 
the  General  Manager  of  the  Merchants  and  Miners  Transporta- 
tion Company,  and  is  still  effective : 

That  to  Pittsburgh  and  all  points  taking  60  to  71  per 
cent  inclusive,  of  Chicago  rates,  the  differentials  of  the 
Merchants  and  Miners  Transportation  Company  and  roads 
connecting  therewith  shall  be: 

123456  Classes 


654322  cents  per  100  Ibs. 


respectively,  below  the  standard  all-rail  rates  from  Boston 
and  Boston  points.' ' 

Then  we  have  Rule  No.  186  which  treats  of  differentials  from  New 
York  via  the  Central  Vermont  route  (National  Despatch  Line) : 

"The  following  differentials  are  applied  by  the  Central  Vermont 
route  (National  Dispatch  Line)  from  New  York  via  New  London, 
insured,  to  the  Detroit  River  and  points  west: 

i      23456  Classes 


10     8     6     4     4     3  cents  per  100  Ibs. 

— except  that  slightly  reduced  differentials  are  applied  to  points 
taking  78  to  8 1  per  cent  of  New  York-Chicago  rates." 

I  do  not  want  to  weary  you,  gentlemen,  by  reiterating  all  these  points. 
I  think  I  have  given  you  enough  of  these  records  to  show  that  the  differ- 
ential as  applied  in  the  east  is  very  general  in  its  character;  that  the 
differential  applied  in  the  south  is  pretty  general  in  its  character;  and 
I  hope  to  show  you  before  I  finish,  that  the  differential  is  pretty  general 
all  over,  and  that,  apart  from  the  equities  and  merits  of  the  Canadian 
Pacific  Ry.  having  differentials  on  this  particular  business,  precedent 
after  precedent  has  been  established,  and  our  reasons  for  asking  a  con- 
tinuance of  the  established  differentials  on  this  traffic  are  at  least  equally 
as  good  as  any  reasons  that  can  be  advanced  by  those  lines  that  do  enjoy 
that  privilege,  and  we  think  in  most  instances  very  much  better. 

The  Chesapeake  and  Ohio  have  the  same  differential  rate  from  East- 
ern Seaboard  points  to  Chicago  as  the  National  Despatch,  of  which  I 
have  just  been  treating,  these  differences  applying  on  the  standard  rates 
from  the  Seaboard  points  to  the  Mississippi  River  points.  Now,  a  great 
deal  has  been  said,  chiefly  on  the  outside,  about  the  Canadian  Pacific 
Ry.  seeking  by  its  long,  circuitous  and  broken  route  to  share  in  a  ton- 
nage as  against  more  direct  and  shorter  lines  all-rail,  and  I  propose  to 
show  to  you  gentlemen  that  not  only  have  we  a  precedent  on  which  to 
claim  differentials,  many  of  them,  and  that  we  also  have  numerous  prece- 
dents to  show  that  there  are  numerous  broken  circuitous  water-and- 
rail  lines  operating  all  over  the  country  that  are  longer  and  more  cir- 
cuitous than  ours,  and  still  they  do  operate  with  more  or  less  success,  and 
among  those  lines  we  will  be  able  to  show  you,  I  hope,  that  some  of  the 
roads,  known  as  Trans-Continental  lines  are  engaged  in  operating  broken, 
long,  circuitous  routes  in  competition  with  direct  all-rail  rivals.  In  saying 
this  I  do  not  wish  to  be  understood  as  criticising  the  right  of  any  road  to 
go  anywhere,  even  with  a  broken  and  circuitous  line,  to  seek  for  busi- 
ness, so  long  as  they  are  satisfied  that  taking  all  the  circumstances  into 
account  such  business  will  afford  them  some  small  measure  of  profit. 


i8 

Therefore,  I  will  take  up  a  little  of  your  time,  if  you  please,  on  the  ques- 
tion of  distances  over  which  these  circuitous  and  broken  routes  operate. 

The  distance  by  the  Chesapeake  &  Ohio  Road,  Boston  to  Newport 
News,  is  544  miles  by  water,  Newport  News  to  Chicago,  1071  miles,  total 
1615  miles  from  Boston  to  Chicago,  against  1020  miles  by  the  shortest  all- 
rail  line  from  Boston,  showing  the  line  via  Newport  News,  58  per  cent 
longer.  The  distance  by  the  Chesapeake  &  Ohio  from  New  York  to 
Newport  News  is  305  miles,  to  which  add  1071  miles  Newport  News  to 
Chicago,  total  1376  miles  against  the  shortest  all-rail  line  of  912  miles, 
50.87  per  cent  longer.  Again  the  distance  between  Boston  and  Duluth 
by  all-rail  is  1382  miles,  against  2195  miles  via  Newport  News  and  Chi- 
cago, 58.82  per  cent  longer  by  the  broken  route. 

The  Southern  Pacific  Co.,  or  System  rather,  in  connection  with  the 
Morgan  Line  steamers  carries  business,  via  New  York,  New  Orleans 
and  Fort  Worth,  to  Utah  points  at  a  differential  rate.  The  distance  from 
New  York  to  Denver  via  water  to  New  Orleans  thence  rail  to  Fort  Worth 
is  3155  miles  against  1940  miles  by  the  direct  all-rail  line,  showing  it  to 
be  longer  via  New  Orleans  62.61  per  cent. 

Now,  this  is  a  case  we  would  like  to  impress  upon  the  minds  of  the 
Arbitrators  as  one  of  great  importance  and  establishing  a  precedent, 
which  we  have  never  followed  in  its  entirety,  for  claiming  differential 
rates  in  favor  of  broken  water-and-rail  routes.  Here  we  have  a  line 
operated  around  through  New  Ofleans  to  Denver,  we  will  say,  that  is 
over  62  per  cent  longer  in  distance,  than  the  all-rail  line  and  that  line  is 
operated  under  very  heavy  differentials, — and  bear  in  mind,  gentlemen, 
that  that  line  is  operated  and  controlled  by  a  company  who  at  this  present 
hearing  is  one  of  our  chief  opponents  and  who  is  here  to  tell  you  that 
the  Canadian  Pacific  Company  is  not  entitled  to  any  differential  rates  in 
competing  with  them,  and  as  their  representative  here  is  a  gentleman  of 
very  frank  and  open  disposition,  I  am  perfectly  sure  he  will  admit  to 
you  and  give  you  the  reasons  why,  in  opposing  us  and  trying  to  take  away 
our  differentials,  he  should  be  willing  to  acquire  and  hold  a  relatively 
much  greater  differential  as  against  his  rail  competitors  into  Utah  and 
Colorado,  around  so  long  and  circuitous  route. 

Now,  the  history  of  this  differential  enjoyed  by  the  Southern  Pacific 
Co.  on  their  New  York-Colorado  and  Utah  line,  via  New  Orleans,  as 
reported  to  me  runs  as  follows :  When  they  opened  their  line  some  years 
ago  they  began  by  taking  the  canal-and-lake  rates  to  Chicago  and  local 
rates  of  the  line  from  Chicago  to  Colorado  common  points,  and  then 
charging  80  per  cent  of  the  canal  Chicago  rates  added  to  the  rates  beyond 
which  gave  them  a  differential  of 

!       2       3       4       5      A        B        C      D      E  classes 
43    35     32    22     17     Hi     I0i     J3     J3     13  cents 


19 

Now,  I  am  also  advised  that  although  these  differentials  were  based 
on  the  canal-and-lake  rates,  the  Southern  Pacific  insisted  upon  applying 
them  all  the  year  round  during  the  period  when  navigation  by  canal  was 
closed — and  very  naturally  their  action  in  that  respect  caused  a  very  great 
deal  of  trouble  and  friction.  But  in  December,  1897,  they  got  together 
and  held  a  meeting  and  discussed  the  situation,  and  finally  agreed  that 
the  following  differentials  under  the  all-rail  rates,  from  New  York  to 
Denver,  would  be  allowed  to  the  Southern  Pacific  lines  via  New  Orleans : 

_i 2345ABCDE  classes 

39     30     26     16     14     ii     ii      ii      ii     ii  cents 

Now,  it  has  been  maintained  and  stated  very  frequently,  that  what- 
ever differentials  applied  in  the  east,  in  Trunk  Line  and  Central  Freight 
territory,  that  with  the  exception  of  the  Canadian  Pacific,  that  there  was 
no  precedent  established  west  of  Chicago — that  there  was  no  such  thing 
as  differentials  anywhere  west  of  Chicago;  that  the  lines  did  not  partici- 
pate in  them  in  any  way.  But,  we  find  in  the  face  of  these  statements,  that 
these  differentials  accorded  to  the  Southern  Pacific  Company  on  their 
New  York-Denver  and  Utah  points,  have  been  assented  to  by  the  lines 
west  of  Chicago,  the  lines  east  not  participating  in  any  way.  Now,  that 
being  the  case  it  seems  to  me  it  establishes  a  precedent  and  does  away 
with  the  argument  that  in  no  instance,  with  the  exception  of  the  Cana- 
dian Pacific  Company,  are  differentials  allowed — acknowledged  in  any 
way  by  the  lines  west. 

Now,  having  touched  on  the  differentials  enjoyed  by  the  Southern 
Pacific  on  their  Colorado  and  Utah  line,  I  would  like  to  point  out  that 
they  do  enjoy  differentials  via  their  Sunset  line  on  Trans-Continental  busi- 
ness, and  by  the  list  that  I  propose  to  submit  to  the  Board,  prove  that  on 
a  very  large  tonnage,  a  very  large  proportion  of  their  Trans-Continental 
business,  via  their  Sunset  line,  they  enjoy  a  higher  differential  than  the 
Canadian  Pacific  Company  today.  The  Southern  Pacific  Company  by  their 
Sunset  line,  through  New  Orleans,  have  differentials  averaging  10.94 
per  cent  from  New  York  Pier  to  San  Francisco,  on  numerous  commodi- 
ties, as  against  the  all-rail  lines  from  New  York  City,  thereby  enabling 
the  Sunset  line  to  control  a  very  large  tonnage  from  New  York  City  and 
to  reach  out  into  the  interior  against  the  all-rail  lines.  We  submit  a  list 
of  the  commodities  and  rates  taken  from  the  current  tariffs  published  by 
the  Trans-Continental  Freight  Bureau,  showing  differentials  allowed  to 
the  Sunset  line  of  the  Southern  Pacific  Company.  (Mr.  Kerr  here  sub- 
mitted to  the  Board  the  paper  marked  "Exhibit  i.")  That  list,  gentlemen, 
speaks  for  itself  and  is  abstracted  from  the  current  tariff  of  the  Trans- 
Continental  Freight  Bureau,  the  Southern  Pacific  Company  taking 
ground  in  their  discussions  with  their  associates  that  whatever  rates  are 


20 

made  from  Chicago,  if  they  are  graded  less  than  the  rates  from  New  York, 
that  they,  the  Southern  Pacific  Company  by  their  Sunset  line  will  adopt 
from  New  York  Pier, — the  Morgan  Line  pier  in  New  York, — the  same 
rates  that  the  other  lines  make  out  of  Chicago  to  California  points.  In 
that  way,  as  we  show  you,  they  obtain  a  differential  greater  than  ours, — 
the  Canadian  Pacific, — and  as  you  can  see  by  looking  over  the  list,  it 
involves  a  very  large  tonnage,  a  very  large  proportion  of  the  whole;  it 
covers  numerous  staples.  Yet,  gentlemen,  they  are  here  to  argue  that 
the  Canadian  Pacific  differentials  should  be  abolished. 

Now,  just  to  step  aside  for  a  moment  from  the  direct  line,  it  may  not 
be  amiss  to  state  that  the  Great  Northern  Railway,  the.  great  stickler 
against  the  Canadian  Pacific  differentials,  are  themselves  today  enjoying, 
and  by  consent,  a  differential  below  the  Canadian  Pacific  rates,  below  the 
Southern  Pacific  rates,  and  below  the  Northern  Pacific  rates  in  connec- 
tion with  their  Asiatic  traffic.  The  Asiatic  Steamship  line  known  as  the 
Nippon  Yusen  Kaisha  Company,  a  Japanese  line  operating  with  the  Great 
Northern  Railway  Company  to  and  from  Seattle  and  China  and  Japan 
ports,  to  points  in  the  United  States  and  Canada,  have  a  differential  as 
against  the  Canadian  Pacific,  the  Northern  Pacific  and  the  Southern 
Pacific  of  1 6  2-3  per  cent  on  silk  traffic  and  5  per  cent  on  tea  and  other 
merchandise.  They  enjoy  this  differential  and  by  the  means  of  it  they  are 
able  to  get  their  proper  and  reasonable  share  of  traffic  as  against  the 
stronger  lines  of  the  Southern  Pacific,  the  Northern  Pacific  and  the  Cana- 
dian Pacific. 

ARBITRATOR  DAY— Between  what  points,  Mr.  Kerr? 

MR.  KERR — China  and  Japan  ports  to  all  points  in  the  United  States 
and  Canada. 

ARBITRATOR  DAY— Let  me  ask  where  you  get  that  informa- 
tion; what  is  the  source? 

MR.  KERR — By  an  Agreement  to  which  we  are  parties. 

ARBITRATOR  DAY— Is  that  a  public  tariff,  that  you  speak  of? 

MR.  KERR — No,  it  is  a  percentage  tariff  allowed  by  agreement,  of 
which  I  have  here  an  abstract,  and  will  read  it  to  you  so  that  you  will— 

ARBITRATOR  DAY— Pardon  me,  but  I  do  not  want  to  break  up 
your  argument,  yet  what  I  want  to  know  is  if  this  is  a  tariff  that  is  printed 
and  filed  according  to  law — filed  with  the  Inter-State  Commerce  Com- 
mission? 

MR.  KERR — There  is  no  such  tariff — as  I  understand,  tariffs  are  not 
filed  with  the  Inter-State  Commission  as  between  China  and  Japan  ports. 

ARBITRATOR  DAY— This  does  not  apply  between  Atlantic  points 
and  Pacific  points? 

MR.  KERR — No;  it  is  eastbound;  so  far  as  we  are  concerned  it  is 
from  China  and  Japan  ports  via  Seattle  and  the  Great  Northern  road 
to  any  point  in  the  United  States  and  Canada. 


21 

ARBITRATOR  DAY— It  is  a  through  tariff;   it  is  not  a  local  tariff 
from  interior  points? 
MR.  KERR— No. 

MR.  STUBBS — Have  you  a  copy  of  the  Agreement?  If  so,  I  suggest 
you  file  it  for  the  use  of  the  Board. 

MR.  KERR — I  have  not  the  Agreement,  but  I  have  a  copy  here.  It 
states  here  an  Agreement  dated  Hong  Kong,  March  23rd,  1898,  between 
the  Trans-Pacific  lines,  Northern  Pacific  Company,  Tacoma  and  Portland 
lines,  Pacific  Mail  line,  Occidental  &  Oriental  Company  to  San  Francisco, 
the  Nippon  Yusen  Kaisha  Company  to  Seattle,  and  the  Canadian  Pacific 
Railway  for  the  purpose  of  advancing  and  maintaining  rates  on  freight 
and  cargo  generally,  from  China  and  Japan  to  all  points  in  Canada  and 
the  United  States  of  America.  The  Nippon  Yusen  Kaisha  Company,  in 
connection  with  the  Great  Northern  Railway,  are  enjoying  the  following 
differentials  (I  see  this  is  not  an  abstract  of  the  Agreement,  but  it  is  a 
statement). 

MR.  STUBBS— I  just  wanted  to  get  it  before  the  Board,  but  I  think 
you  and  I  can  agree  upon  it. 

MR.  KERR — We  can  file  it,  of  course.  First,  on  raw  silk  cargo  (these 
are  the  terms),  the  Nippon  Yusen  Kaisha  Co.  and  the  Great  Northern 
Railway  are  allowed  a  differential  of  $1.00  per  hundred  pounds,  equal 
to  162-3  per  cent,  the  Nippon  Yusen  Kaisha  Co.  rate  being  $5.00  per 
hundred  pounds,  the  other  lines  having  $6.00  per  hundred  pounds  on  raw 
silk. 

ARBITRATOR  WASHBURN— May  I  ask  why  that  was  granted; 
was  it  because  their  line  was  longer  than  the  other  lines? 

MR.  KERR — Because  their  line  was  weaker,  and  slower  time  and 
poorer  ships,  less  chance  of  doing  business  on  equal  terms  and  that  was 
recognized, — recognized  by  the  Canadian  Pacific  and  recognized  by  the 
Southern  Pacific  and  Northern  Pacific — all  acknowledging  that  they  were 
stronger  lines  and  better  able  to  secure  and  obtain  traffic  than  that  weak 
line  with  poor  ships. 

ARBITRATOR  DAY— When  was  that  Agreement  entered  into? 
MR.  KERR— March  23rd,  1898. 
ARBITRATOR  DAY— Where? 
MR.  KERR— At  Hong  Kong. 
ARBITRATOR  DAY— By  whom? 

MR.  KERR — By  the  respective  representatives  of  the  lines. 
Second,  on  tea  and  all  other  cargo  the  Nippon  Yusen  Kaisha  and  the 
Great  Northern  Railway  are  allowed  to  charge  a  differential  rate  of  5 
per  cent  lower  than  the  other  lines,  under  the  Trans-Pacific  Agreement. 

I  was  going  to  say,  Mr.  Chairman,  and  I  would  like  to  impress  it  upon 
the  minds  of  you  gentlemen,  that  not  only  did  the  Canadian  Pacific  enter 
into  that  Agreement  to  allow  the  weaker  line  a  differential  on  traffic  in 


22 

order  that  they  should  secure  their  fair  share  of  business  to  the  United 
States  and  also  to  Canada,  and  bear  in  mind  also  that  Hong  Kong  is  a 
British  Crown  Colony  and  Canada  a  British  Dominion — and  there  is  no 
question  raised,  or  distinction  made  as  between  one  point  to  another  in 
the  British  possessions,  or  one  point  to  another  from  a  British  point  to 
an  American  point.  I  just  wanted  to  make  that  point  because  I  will 
have  further  to  say  on  that  subject  later  on. 

ARBITRATOR  DAY— I  would  like  to  ask  before  going  further, 
who  are  the  parties  to  that  Hong  Kong  Agreement? 

MR.  KERR — The  representatives  of  the  Pacific  Mail,  the  Oriental  & 
Occidental  Steamship  lines,  in  connection  with  and  as  representing  the 
Southern  Pacific  Co.  on  this  side,  and  the  representatives  of  the  Northern 
Pacific  Steamship  line. 

ARBITRATOR  DAY— The  point  I  was  trying  to  get  at  is  who  are 
the  parties  to  the  Agreement. 

MR.  KERR— I  am  telling  you. 

ARBITRATOR  DAY — You  were  speaking  of  representatives. 

MR.  KERR — The  men  who  signed  the  Agreement? 

ARBITRATOR  DAY— Yes. 

MR.  KERR — I  was  just  telling  you.  Which  of  course  has  been  con- 
firmed by  the  Executive  Officers  of  the  railway  companies  interested. 
The  first  party,  as  I  say,  was  the  Pacific  Mail  and  the  Southern  Pacific 
Co.,  the  second  was  the  Northern  Steamship  Line  and  the  Northern 
Pacific  Company  and  third  is  the  Canadian  Pacific  Steamship  Line  and 
the  Canadian  Pacific  Railway  Company,  with  the  Nippon  Yusen  Kaisha 
Co.,  a  Japanese  Company  operated  with  and  in  connection  with  the  Great 
Northern  Railway  Company,  and  we  three  as  first  stated  accorded  to  the 
weaker  line  this  differential. 

MR.  STUBBS — I  would  like  to  ask  the  gentleman  whether  he  will 
close  or  whether  he  will  take  up  all  the  afternoon  or  not.  I  suppose  it  is 
desirable  to  get  through  as  quickly  as  possible. 

ARBITRATOR  WASHBURN— On  the  other  hand,  I  think  it  is 
desirable,  and  my  colleagues  think  the  same,  that  each  party  to  this  arbi- 
tration should  have  the  fullest  opportunity  to  present  its  case,  so  that  we 
may  have  all  the  facts  before  us. 

MR.  STUBBS — The  object  of  my  question  was  to  find  out  whether  I 
should  come  here  prepared  to  take  up  our  case  during  this  afternoon  or 
not. 

ARBITRATOR  WASHBURN— I  do  not  know  whether  any  one 
else  than  Mr.  Kerr  proposes  to  address  the  Board  or  not. 

MR.  STUBBS — I  am  the  servant  of  the  Board  in  this,  and  if  you  want 
to  keep  up  until  late,  it  is  all  right  with  me. 

MR.  KERR — I  am  a  slow  speaker  and  a  slow  thinker. 

MR.  STUBBS — I  do  not  wish  to  hurry  you  at  all;  all  day  and  all 


23 

night,  for  that  matter,  will  suit  me.  I  have  nothing  else  to  do  but  attend 
to  this. 

ARBITRATOR  WASHBURN— Will  there  be  any  one  to  follow  you 
on  your  side  of  the  case,  Mr.  Kerr? 

MR.  KERR — Mr.  Bosworth  may  have  something  to  say. 

MR.  BOSWORTH— I  think  not 

At  i  :io  P.  M.  an  adjournment  was  taken  to  2:30  o'clock  P.  M. 


Afternoon  Session,  October  i2th,  1898,  2:30  P.  M. 

The  Meeting  being  called  to  order  by  the  Chairman,  Mr.  Kerr  con- 
tinued his  argument  as  follows : 

MR.  KERR — Mr.  Chairman  and  Gentlemen:  In  closing  at  the  noon 
hour  I  dealt  with  the  question  of  differentials  to  the  Great  Northern  Road 
in  connection  with  their  Asiatic  business.  I  now  propose  to  show  that  the 
Great  Northern  and  Northern  Pacific  lines  enjoy  differentials  on  Trans- 
Continental  business  from  Eastern  points  to  the  North  Pacific  Coast, 
Portland  and  North.  By  the  tariff  that  I  have  here,  numbered  S.  R.  128, 
Amendment  No.  I  to  Westbound  Tariff  No.  i-C.:  "Differential  Rates 
via  Lake-and-Rail  applying  during  the  season  of  Lake  navigation,  via 
Great  Northern  Railway,  Northern  Pacific  Railway,  Oregon  Railroad  & 
Navigation  Company,  via  Spokane  and  Wallula  Junction,  in  connection 
with  the  Erie  &  Western  Transportation  Company  (Anchor  Line),  North- 
ern Steamship  Company,  Port  Huron,  Washburn  &  Duluth.Line,  Union 
Transit  Company,  Western  Transit  Company,  Canada  Atlantic  Transit 
Company,  Georgian  Bay  and  Lake  Superior  Steamship  Line  and  Eastern 
Roads  named  on  page  2  hereof."  "From  points  in  territory  described 
below  to  North  Pacific  Coast  Terminals,  namely:  Portland,  East  Port- 
land, Albina  and  Astoria,  Ore.,  and  points  north  thereof,  taking  'Terminal' 
rates  (as  described  on  pages  i,  2  and  3  of  Tariff  No.  i-C.)."  When  the 
through  all-rail  class  or  commodity  rate  per  100  pounds  is  75  to  79  cents, 
inclusive,  the  differential  allowed  to  the  Great  Northern  and  Northern 
Pacific  rail-and-lake  lines  is  5  cents,  and  they  go  on  in  an  increasing  scale 
that  you  can  easily  refer  to.  I  do  not  need  to  burden  the  minutes 
with  them,  because  they  are  right  here.  They  go  on  in  increasing  scale, 
up  to  25  cents  per  hundred.  The  same  differentials  are  shown  in  Supple- 
ment No.  2  to  Trans-Continental  Westbound  Tariff  No.  i-C.,  Buffalo  to 
Milwaukee  (821  miles),  and  Buffalo  to  Chicago  (889  miles),  in  connection 
with  the  Union  Pacific,  Atchison,  Topeka  &  Santa  Fe  and  other  Western 
roacjs. 

Now,  gentlemen,  we  maintain  that  on  their  own  showing  these  lines 
who  complain  of  the  Canadian  Pacific  differentials,  that  they  are,  for  a 


24 

large  portion  of  the  year, — that  portion  of  the  year  when  a  very  large, 
probably  the  largest  tonnage  moves,  during  open  lake  navigation — they 
are  enjoying,  by  their  broken  rail-and-water  route  a  complete  system  of 
differentials,  every  one  of  them,  the  Southern  Pacific  included,  with  the 
exception  of  their  Sunset  line,  which,  of  course,  cannot  take  business  that 
way.  They  all  get  the  benefit  of  these  differential  rates  that  apply  in  con- 
nection with  the  lake-and-rail  lines. 

We  have  now  cited  a  sufficient  number  of  cases  of  differentials  as 
applied  all  over  the  various  sections  of  the  United  States  in  connection 
with  United  States  traffic.  I  now  propose  to  show  you  that  American 
lines  enjoy  a  very  large  differential  in  connection  with  purely  Canadian 
traffic,  traffic  shipped  from  one  point  in  Canada  to  another,  via  American 
lines  and  their  Lake  connections,  broken  water-and-rail  routes,  and  I  hope 
also  to  show  you  that  the  average  distance  as  between  the  points  in 
Canada  traveled  by  the  Canadian  Pacific  and  by  the  all-rail  American 
route  are  practically  the  same.  In  fact,  I  think  they  are  a  little  in  favor 
of  the  American  lines.  We  have  here  a  memorandum  accompanied 
by  the  tariffs  that  prove  our  statements  that  the  following  differential 
rates  are  enjoyed  by  lake-and-rail  as  against  all-rail  from  Montreal  to 
Winnipeg,  and  when  I  say  Montreal,  that  covers  everything  west  of 
Montreal  in  the  province  of  Quebec  and  in  Ontario,  up  to  the  Detroit 
River.  The  present  rates,  Montreal  to  Winnipeg,  are  (the  ninth  is  not  in 
there  for  the  reason  that  it  is  live  stock  and  of  course  it  does  not  go  by 
the  lake) : 

i         2         3        45678      10  classes 
All-rail  198     170     135     105     88     80    70     70    62      cents 

Lake-and-rail     143     123     103       87     72     70     55     55     47 

showing  a  range  of  differentials  from  55  cents  first  class  to  16  cents, 
fifth  class,  and  15  cents,  tenth  class  or  lower. 

Then  we  have  from  Montreal  to  Kootenay  points,  British  Columbia, 

Canada : 

i  2345678  10     classes 

All-rail                   405  353     300     248     205     199     169     i^S  131    cents 

Lake-and-rail        375  329     283     242     200     194     164     151  126 

showing  a  range  of  differentials  from  30  cents  first  class  down  to  5 
cents  on  fifth  and  lower. 

ARBITRATOR  DAY— Mr.  Kerr,  where  do  lake  steamers  get  that 
traffic? 

MR.  KERR— They  get  it  at  Sarnia  and  at  Owen  Sound. 

ARBITRATOR  DAY— Is  that  the  same  on  the  Winnipeg  traffic  you 
spoke  of? 

MR.  KERR— Also  at  Parry  Sound  by  the  Canada  Atlantic,  thence  to 
Duluth  and  thence  by  American  lines  on  to  destination. 


25 

ARBITRATOR  DAY— On  that  lake-and-rail  traffic  from  eastern 
Canadian  points,  from  one  Canadian  point  to  another  Canadian  point, 
take  the  one  you  have  illustrated  from  Montreal  to  Kootenay,  is  the  lake 
traffic  exclusively  carried  in  Canadian  or  British  bottoms  or  in  American 
vessels? 

MR.  KERR — It  is  carried  in  Canadian  bottoms,  in  connection  with 
either  American  or  Canadian  roads.  We  have  our  own  line  by  lake-and- 
rail  via  Owen  Sound  to  Fort  William.  The  American  lines,  the  North- 
ern Pacific  and  Great  Northern  and  also  the  Union  Pacific  (Yes,  they 
can  get  in  there  via  the  Omaha),  but  the  Great  Northern  and  Northern 
Pacific — I  cite  them  as  the  chief  ones — they  carry  from  Duluth  on  to 
Winnipeg,  to  Kootenay  and  the  British  Columbia  Coast. 

MR.  STUBBS — Do  I  understand  the  Canadian  Pacific  Ry.  carries  the 
same  differentials? 

MR.  KERR— Certainly,  certainly. 

From  Montreal  to  British  Columbia  Coast  points  the  rates  are : 

12345678        10     classes 
All-rail  325     283     240     208     180     173     138     113     108      cents 

Lake-and-rail     315     275     233     202     175     168     133     108     103 

giving  a  range  of  differentials  of  from  10  cents  on  first  class  down  to  5 
cents  on  sixth  and  lower. 

Now,  that  brings  out  the  fact  that  the  American  lines  enjoy  their  share 
of  purely  Canadian  traffic  at  differentials  when  they  use  a  broken  route 
as  against  the  unbroken  all-rail  route.  Now,  there  have  been  discussions 
and  arguments  both  formal  and  informal  on  the  question  of  American 
lines  enjoying  purely  Canadian  traffic  and  the  point  has  been  raised  that, 
"yes,  they  enjoy  Canadian  traffic  but  on  a  strict  equality  with  Canadian 
lines."  To  that  we  say,  "yes,  because  the  circumstances  are  precisely 
similar.  You  have  as  good  a  line  from  Ontario  and  Quebec,  all-rail,  to 
those  points  named  as  we  have;  you  have  as  short  a  line  and  in  many 
cases  shorter."  On  the  average  the  American  lines  are  shorter  than 
the  Canadian.  Their  time  is  just  as  good;  their  facilities  are  equal;  their 
environments  are  practically  the  same  as  the  Canadian  Pacific  and  con- 
sequently they  do  not  ask  differentials  any  more  than  we  do  where  our 
circumstances  are  similar  in  connection  with  American  traffic.  We  run 
into  Puget  Sound.  Our  distances  are  relatively  the  same;  may  be,  ice 
miles  or  so  different,  something  like  that.  We  do  not  ask  differentials 
there  because  we  feel  that  we  are  on  a  parity  with  our  neighbor, 
and  there  is  no  special  ground  for  us  asking  a  differential  on  Puget  Sound 
business  any  more  than  there  is  a  ground  for  the  American  lines  to  ask 
a  differential  on  purely  Canadian  business. 

Now,  I  just  want  to  trouble  you  with  a  few  of  the  distances  here  in 
support  of  my  statement  and  to,  if  possible,  allay  that  ghost  that  has  been 
raised  on  various  occasions,  in  answer  to  our  statement  that  American 


26 

lines  enjoy  Canadian  traffic  on  a  perfect  equality,  and  later  on  I  propose 
to  deal  with  the  subject  at  greater  length.  The  distance  from  Toronto 
lo  Winnipeg  by  the  Canadian  Pacific  is  1505  miles,  by  the  route  traveled 
and  by  which  freight  is  hauled;  by  United  States  lines  through  Chicago 
and  St.  Paul,  1377  miles. 

ARBITRATOR  DAY— Is  that  by  way  of  North  Bay? 

MR.  KERR — By  way  of  Carlton  Junction,  the  route  by  which  we  do 
our  business. 

ARBITRATOR  DAY— That,  you  mean,  is  back  towards  Smith's 
Falls? 

MR.  KERR — Yes  sir;  around  Smith's  Falls.  That  is  the  way  we  do 
both  our  freight  and  passenger  business.  That  is  our  route.  We  have 
got  to  go  around  that  way.  From  London  to  Winnipeg  the  Canadian 
Pacific  distance  is  1620  miles;  by  the  American  lines  through  Chicago 
and  St.  Paul,  1301  miles.  From  St.  Thomas  to  Winnipeg  by  the  Canadian 
Pacific  line  the  distance  is  1626  miles;  by  the  American  lines  through 
Chicago  and  St.  Paul,  1266  miles.  From  Montreal  to  Winnipeg  the  dis- 
tance by  the  Canadian  Pacific  line  is  1424  miles;  by  the  American  lines 
through  Chicago  and  St.  Paul,  1710  miles.  Now,  you  see  that  throughout 
the  whole  province  of  Ontario,  which  produces  the  largest  proportion 
of  traffic,  in  tonnage,  going  into  the  Northwest,  the  American  line  has 
quite  an  advantage  over  us  in  distance.  On  the  other  hand  we  have  an 
advantage  out  of  Montreal.  Taking  the  average  together,  I  think  they 
beat  us.  Now,  from  Toronto  to  Nelson,  B.  C.,  which  might  be  called  the 
capital  town — it  is  the  chief  town  in  the  mining  district  of  the  Kootenay, 
the  central  point,  the  commercial  center  of  that  district,  that  great  mining 
district.  From  Toronto  to  Nelson  by  the  Canadian  Pacific  the  distance  is 
2786  miles;  by  the  American  lines  through  St.  Paul  and  Spokane  2586 
miles.  From  St.  Thomas  to  Nelson  by  the  Canadian  Pacific  the  distance 
is  2907  miles;  by  the  American  lines  2475  miles.  From  Montreal  to 
Nelson  by  the  Canadian  Pacific  the  distance  is  2705  miles;  by  the  Ameri- 
can lines,  2919  miles.  Then  take  the  relative  distances  to  the  Coast,  Vic- 
toria, B.  C.,  being  a  common  point  and  center,  the  extreme  outside  point. 
From  Toronto  to  Victoria  by  the  Canadian  Pacific,  the  distance  is  3067 
miles;  by  the  United  States  lines,  through  Seattle,  the  distance  is  2821 
miles.  From  London  to  Victoria,  the  distance  by  the  Canadian  Pacific 
is  3182  miles;  by  the  United  States  lines,  2745  miles.  From  St.  Thomas 
to  Victoria,  by  the  Canadian  Pacific,  the  distance  is  3188  miles;  by  the 
United  States  lines,  2710  miles.  From  Montreal  to  Victoria,  by  the  Cana- 
dian Pacific,  the  distance  is  2986  miles;  by  the  American  lines  3154  miles. 
So  I  do  not  think,  from  that  showing,  any  argument  would  stand,  if  made, 
that  the  American  lines  should  have  a  differential  on  Canadian  business, 
any  more  than  the  Canadian  lines  should  have  a  differential  on  Puget 
Sound. 


27 

ARBITRATOR  DAY— Mr.  Kerr,  how  mucn  shorter  would  it  be  in 
the  distance  from  Toronto  to  Vancouver,  if  you  carried  your  traffic  by 
way  of  North  Bay  rather  than  back  east  to  Carlton  Junction;  how  much 
would  it  shorten  the  line? 

MR,  KERR — 215  miles.  But,  of  course,  we  must  look  the  facts  in  the 
face,  as  they  exist.  We  have  got  no  line  by  North  Bay,  and  do  not 
expect  ever  to  have  one,  and  we  are  working  to  have  our  freight  and 
passenger  business  run  through  Carlton  Junction  and  Smith's  Falls,  a 
section  you  are  no  doubt  familiar  with. 

Mr.  Chairman,  with  your  permission,  I  shall  file  this  memoranda  show- 
ing the  differentials  on  Canadian  business  (producing  paper  marked  "Ex- 
hibit 2"),  and  this  as  showing  the  relative  distances  between  Canadian 
points  (producing  paper  marked  "Exhibit  3"). 

Having  shown  that  there  is  a  general  system  of  differentials  allowed 
by  the  American  all-rail  lines  to  the  broken  water-and-rail  routes,  and  in 
allowing  such  have  admitted  that  there  are  good  reasons  for  it,  we  claim 
that  there  are  greater  reasons  why  the  differential  rates  should  be  contin- 
ued to  the  Canadian  Pacific  rail-and-water  line  to  and  from  San  Francisco 
and  the  East.  We  operate  a  rail  line  to  Vancouver,  thence  steamer  to 
San  Francisco.  Our  distance  from  New  York  to  San  Francisco  is  4,023 
miles  as  against  3270  miles  by  all-rail,  thus  showing  that  we  have  a 
greater  distance  by  23  per  cent.  From  Chicago  the  Canadian  Pacific  dis- 
tance is  3,053  miles,  as  against  2357  miles  by  all-rail,  making  the  Canadian 
Pacific  line  21  per  cent  greater  in  length.  From  St.  Louis  the  Canadian 
Pacific  distance  is  3,233  miles,  as  against  2,433  miles  by  all-rail,  showing 
that  our  distance  is  32.88  per  cent  greater. 

Our  steamer  service  is  infrequent,  that  is  between  Vancouver  and 
San  Francisco,  sailing  only  once  in  every  five  days.  Our  time  is  long, 
averaging — in  fact,  not  averaging  in  our  case — our  minimum  time  from 
New  York  is  25  days  and  from  Chicago  19,  as  against  the  average  time  of 
the  all-rail  lines  from  New  York  19  days  and  from  Chicago  14.  The  Sun- 
set line  from  New  York  to  San  Francisco  averages  14  days.  In  fact,  I 
have  been  told  that  that  is  their  outside,  really;  they  do  not  ever  take  any 
longer  time  than  14  days  and  often  less.  The  Santa  Fe,  in  connection  with 
the  Mallory  line,  makes  15  days.  Owing  to  the  infrequency  of  our 
steamer  sailings,  goods  often  arrive  at  Vancouver  right  after  the  sailing  of 
a  steamer,  and  consequently  lay  in  that  port  4  or  5  days  before  they  can 
go  forward.  The  steamer  route  between  San  Francisco  and  Vancouver 
is  a  stormy  one;  steamers  have  to  run  along  the  Coast,  in  doing  so  they 
encounter  a  heavy  beam  sea  which  causes  them  to  tumble  and  roll. 
Goods  are  handled  from  car  into  the  vessel  and  again  hoisted  out  of  the 
vessel  at  San  Francisco.  These  various  handlings  coupled  with  stormy 
weather  which  frequently  prevails  makes  freight  liable  to  a  large  percent- 
age of  chafing  and  damage,  whereas  goods  shipped  by  all-rail  are  loaded 


28 

into  a  car  and  not  disturbed  until  they  reach  their  destination.  The  dis 
tance  from  Vancouver  to  San  Francisco  by  sea  is  840  miles  direct,  but 
the  steamers  we  operate  in  our  connection,  do  not  run  direct.  They  first 
go  to  Vancouver  and  take  on  such  freight  as  we  have  to  offer  them,  then 
they  run  down  into  Puget  Sound  and  take  on  such  further  cargo  as 
may  be  for  them  in  the  various  ports  in  Puget  Sound.  They  remain  in 
Puget  Sound  about  two  days,  then  sail  from  Seattle  to  Victoria  and  thence 
direct  to  San  Francisco.  A  steamer  leaving  Vancouver  on  the  1st  day 
of  October,  that  is  with  Canadian  Pacific  freight,  will  not  reach  San  Fran- 
cisco until  the  7th,  so  that  the  time  occupied  for  a  ton  of  freight,  from  the 
time  it  leaves  our  car  at  Vancouver,  is  six  full  days  before  the  ship  reaches 
San  Francisco.  Now,  the  distance  from  Vancouver  to  Seattle  is  150  miles 
and  from  Seattle  to  Victoria,  87  miles.  The  distance  from  Victoria  to 
San  Francisco  is  760  miles,  which  makes  a  total  distance  that  goods  car- 
ried from  Canadian  Pacific  points  are  carried  by  sea  of  997  miles,  say,  in 
round  figures,  1,000  miles  those  goods  are  carried  by  sea  after  they  leave 
Canadian  Pacific  cars.  Now,  in  the  time  made  here,  the  Canadian  Pacific 
Company  ordinarily  averages  as  fair  time  to  Vancouver  as  the  other  all- 
rail  lines  to  their  various  termini,  that  is,  I  think  we  get  to  Vancouver 
about  as  quick  as  the  rail  lines  get  to  San  Francisco,  or  the  other  lines, 
say,  the  Northern  Pacific  or  the  Great  Northern  get  to  Seattle  and 
Tacoma,  or  Portland,  as  the  case  may  be,  but  the  great  break  and  hitch 
is  the  water  portion  of  the  route.  Say,  it  takes  the  direct  lines  19  days  to 
run  from  New  York  to  San  Francisco;  we  may  do  that  in  19  days  from 
New  York  to  Vancouver  and  when  we  reach  Vancouver,  we  may  be  just 
one  day  behind  the  sailing  of  a  ship  which  results  in  a  delay  at  Vancouver 
before  the  goods  can  go  forward,  of  at  least  4  days,  to  which  add  the  6 
days  which  it  occupies  after  the  ship  takes  the  goods  before  it  reaches  San 
Francisco  and  you  have  29  days,  so  that  when  we  make  25  days,  it  is  when 
we  make  close  connection  with  the  steamer  sailing.  Now,  these  are  all 
obstacles  in  the  way  of  obtaining  business;  very  serious  obstacles.  No 
man  is  going  to  ship  his  goods  by  a  long  broken  route  for  the  same 
money  that  he  can  have  his  goods  carried  by  a  short,  direct  and  all-rail 
route  or  by  another  broken  water-and-rail  route  that  delivers  his  goods 
into  San  Francisco  in  one-half  the  time  that  the  Canadian  Pacific  can  do 
it.  When  you  go  to  that  man  and  ask  for  his  business,  you  must  have 
something  tangible  to  offer  him  as  an  offset  to  such  serious  disadvan- 
tages and  if  you  have'  not  got  an  offset  to  offer  him,  do  not  waste  your 
time  in  canvassing  him  or  calling  on  him,  because  you  will  not  get  his 
business.  I  think  that  is  very  plain  and  a  simple  statement  of  facts  that 
every  one  in  this  room  knows  to  exist.  Now,  in  the  various  discussions 
that  have  arisen  on  this  subject,  statements  have  been  made  in  arguments 
that  the  Canadian  Pacific  by  its  broken  route  has  got  a  differential  on 
Trans-Continental  business  and  why  should  not  the  Sunset  route  have  a 


29 

differential  on  its  broken  rail-and-water  line?  The  answer  to  that  is  that 
the  circumstances  concerning  each  are  entirely  different.  There  is  not 
the  slightest  similarity  in  the  case.  In  the  first  place,  they  operate  their 
steamers  between  New  York  and  New  Orleans,  their  water  route  being 
the  initial  line  on  which  goods  are  shipped.  Those  steamers  run  to  New 
Orleans  where  cars  are  waiting  cargo.  That  cargo  is  quickly  transferred 
and  dispatched  over-land  to  San  Francisco  and  there  is  no  question  of 
delay  whatever.  They  make,  as  is  shown,  faster  time,  in  fact  about  one- 
half  the  time  that  we  can  make  and  very  much  less  than  the  all-rail. 
The  Sunset  line  makes  26  per  cent  shorter  time  than  the  all-rail. 

Now,  in  connection  with  accumulating  business  by  the  Sunset  line, 
their  water  line  being  the  initial,  it  is  well  known  that  steamer 
lines  in  securing  business  are  not  at  all  particular  as  to  classi- 
fication or  weight.  That  is  the  history  of  the  manner  in 
which  the  steamer  lines  carry  on  their  business  usually  and 
shippers  often  think  they  see  an  advantage  in  using  the  water  lines 
as  against  all-rail,  in  order  to  evade  the  classification  and  weight  as  much 
as  possible.  It  is  also  well  known  that  the  Southern  Pacific  Co.  are  pretty 
well  hedged  around  in  California  and  in  large  sections  of  the  state  they 
enjoy  a  monopoly.  This  is  particularly  so  with  regard  to  San  Francisco, 
as  all  lines  entering  the  city,  with  the  exception  of  the  Canadian  Pacific 
and  the  Oregon  Railroad  &  Navigation  Co.  must  use  the  Southern 
Pacific  tracks.  Being  in  this  position,  they  are  enabled  to  influence  busi- 
ness in  various  ways  to  the  Sunset  Line,  in  which  they  have  been  very 
successful.  Merchants  are  naturally  chary  of  unnecessarily  antagonizing 
a  railroad  company  who  has  control  of  their  business,  and  on  the  other 
hand,  the  Southern  Pacific  are  in  a  position  to  offer  various  local  induce- 
ments to  merchants,  thereby  tying  their  business  to  the  Sunset  Line. 
This  is  one  of  the  chief  reasons  why  the  Sunset  Line  has  been  enabled 
to  hold  such  a  large  share  of  Trans-Continental  business  and  proves 
that  their  circumstances  are  so  entirely  different  from  the  Canadian  Pa- 
cific that  they  are  not  entitled  to  differential  rates  as  against  all-rail 
lines,  although,  as  we  have  already  shown,  they  do  enjoy  differentials  on 
numerous  and  very  important  lists  of  commodities. 

It  has  been  stated  that  the  Canadian  Pacific,  being  a  long  and  cir- 
cuitous route,  between  San  Francisco  and  New  York  and  other  eastern 
points,  are  not  entitled  to  participate  in  traffic  against  the  short  and 
direct  line;  but  we  have  shown  that  much  more  circuitous  and  broken 
American  lines  do  participate  in  traffic  in  competition  with  their  direct 
all-rail  rivals.  Whatever  argument  may  be  advanced  against  long  cir- 
cuitous routes  participating  in  passenger  business  as  against  the  short 
direct  lines,  the  same  reason  cannot  be  applied  in  connection  with  freight. 
The  only  point  to  be  considered  is,  can  a  long  and  circuitous  line  obtain 
rates  sufficient  to  leave  a  margin  of  profit  and  in  that  connection  the 


30 

question  of  balancing  traffic  east  and  westbound  enters  largely  into  con- 
sideration. At  certain  times  the  volume  of  paying  traffic  may  be  moving 
eastward,  when  it  may  pay  the  road  to  accept  very  low  class  freight  west- 
ward at  rates  that  under  other  conditions  they  would  not  be  justified  in 
doing.  Again,  a  road  may  be  capable  of  moving  on  its  trains  a  much 
larger  proportion  of  tonnage  than  its  local  business  provides,  to  fill  those 
trains  to  the  hauling  capacity  of  its  locomotive.  Such  trains  must  be 
kept  running  with  regularity  in  order  to  give  a  reasonable  service  and 
if  its  regular  business  will  not  provide  a  sufficient  tonnage  equal  to  the 
hauling  power  of  its  engines,  then  every  extra  carload  that  can  be 
obtained  to  fill  up  within  the  hauling  power  is  so  much  gain,  even  at  rates 
which  under  other  circumstances  would  not  be  profitable.  All  these 
points  must  be  carefully  considered  as  the  circumstances  arise,  in  order 
that  maximum  results  may  be  obtained.  Consequently  broken  and  cir- 
cuitous routes  are  justified  in  seeking  for  business  from  all  sources, 
provided  the  traffic  is  judiciously  and  intelligently  handled  and  governed 
by  circumstances  that  arise  from  time  to  time. 

It  will  be  noticed  that  in  various  places — that  in  the  various  plans 
formulated  for  the  organization  of  Trans-Continental  Associations,  the 
Panama  Route  offers  the  basis  from  which  all  such  organizations  start 
and  the  plans  adopted  from  time  to  time  have  always  been  in  the  nature 
of  a  subsidy,  or  in  fact  a  differential  in  another  form.  Now,  this  is  a  long, 
circuitous,  broken  rail-and-water  route,  operating  its  railroad  through  a 
foreign  country.  The  basis  of  difference  as  between  the  Panama  Route's 
rates  and  the  Trans-Continental  Association  tariff,  is,  under  ordinary  cir- 
cumstances, about  30  per  cent.  In  other  words,  the  Panama  Route  make 
their  rates  under  ordinary  and  similar  circumstances, — they  are  not  doing 
it  now, — about  70  per  cent  of  the  Trans-Continental  Association  rates. 
The  principle  of  subsidy  or  differential  in  dealing  with  them  has  always 
been  advanced  and  acted  upon  and  it  appears  to  us  that  the  Canadian 
Pacific  Company  has  as  good  ground  for  asking  to  be  allowed  to  operate 
in  American  traffic,  having  differential  rates,  as  the  Panama  Route  or 
any  of  the  numerous  American  water-and-rail  lines  who  enjoy  that 
privilege.  Now,  I  do  not  think  it  is  a  breach  of  confidence  to  cite  the 
remarks  made  by  the  President  of  the  Union  Pacific  Company  at  the 
Denver  meeting  in  August  last,  in  connection  with  this  question  of 
Panama  subsidy  and  the  relations  the  Panama  road  bears  to  the  Trans- 
Continental  California  lines.  In  discussing  the  question  of  gaining  the 
co-operation  of  the  Panama  road,  in  connection  with  the  proposed  re- 
formation of  the  Trans-Continental  lines  into  an  association,  it  was  pro- 
posed to  endeavor  to  subsidize  the  Panama  line  steamers  operating  be- 
tween New  York  and  San  Francisco,  via  the  Isthmus  of  Panama,  and  in 
the  discussion,  Mr.  Burt,  the  President  of  the  Union  Pacific,  said : 


"I  could  not  for  the  Union  Pacific  express  an  intelligent  opin- 
ion on  that  matter" — (that  is,  referring  to  the  subsidy  proposed 
to  be  given  to  the  Panama  road) — /'until  I  had  a  copy  of  the 
agreement  and  had  time  to  study  the  general  proposition.  I 
think  I  understand  but  I  could  not  express  an  intelligent  opinion 
or  bind  our  Company  in  any  way,  until  I  had  carefully  studied 
it.  It  seems  to  me  another  way  of  paying  differentials.  I  presume 
the  Canadian  Pacific  Company  might  be  subsidized,  and  thereby 
secure  maintenance  of  Trans-Continental  rates — if  not  in  the  same 
manner,  in  some  manner  which  would  take  revenue  out  of  our 
treasuries  and  put  it  into  theirs.  I  presume  they  are  not  anxious 
to  perform  the  service  but  that  they  would  be  willing  to  accept 
the  money  and  maintain  the  rates,  or  maintain  the  same  rates.  It 
seems  to  me  that  we  are  departing  too  far  or  getting  entirely  away 
from  the  idea  which  we  started  out  with  here  and  which  was  so 
clearly  enunciated  by  some  of  the  speakers  on  the  subject  of  dif- 
ferential rates.  I  cannot  regard  this  as  anything  else  than  a  differ- 
ential under  another  form.  If  we  do  this  for  the  Panama  Route, 
we  may  after  a  while  have  the  Nicaragua  Route,  and  that  will 
not  at  all  discourage  the  building  of  other  routes  or  putting  them 
on.  After  a  while  we  will  have  to  admit  the  claims  of  railroad  lines 
which  have  part  rail  and  part  water  routes  from  the  Atlantic  Sea- 
board to  the  Pacific,  although  those  cases  would  not  be  exact 
parallels.  It  seems  to  me  that  we  are  entering  upon  a  very  broad 
and  unknown  expedition  when  we  are  going  into  anything  of  that 
kind,  and  I,  for  one,  will  have  to  study  it  very  carefully  before  I 
give  an  opinion  for  our  people.  I  do  not  say  that  we  would  not 
give  our  consent,  but  I  would  like  to  look  around  and  see  wrhere 
we  are  likely  to  come  out,  and  have  an  opportunity  to  talk  with 
our  traffic  officials  and  our  connections  who  would  be  interested 
in  the  adoption  of  any  such  policy." 

Now,  I  will  not  burden  you  with  quoting  through  this.  I  understand 
the  arbitrators  have  a  copy  of  it,  but  you  will  see  that  in  following  through 
the  line  of  argument  pursued  there. 

ARBITRATOR  WASHBURN— If  you  desire  to  make  that  a  part  of 
the  record  I  think  you  had  better  do  so.  To  my  knowledge  we  have  no 
copies  of  that. 

MR.  KERR — I  supposed  you  would  have,  I  did  not  know;  I  sup- 
posed it  would  be  natural  you  would  have  a  copy. 

MR.  STUBBS— I  propose  to  file  one  with  the  Board. 

MR.  KERR — You  will  see  that  the  general  trend  of  the  argument  is 
that  the  proposed  subsidy  for  the  future  and  the  subsidies  that  have  been 
paid  in  the  past  to  the  Panama  line  are  simply  another  form  of  differ- 


32 

entials.  There  you  have  a  broken  water-and-rail  route  which  these  gen- 
tlemen are  at  all  times  willing  to  subsidize  with  hard  dollars,  are  willing 
now,  if  they  can  make  a  bargain  on  which  the  lines  could  get  together  and 
conserve  revenues,  but  at  the  same  time  they  are  unwilling  to  allow  us  a 
reasonable  differential  to  overcome  our  disabilities.  In  our  case,  it  is  no 
question  of  rates.  I  do  not  think  they  will  charge  us,  and  if  they  do,  I 
do  not  believe  they  can  substantiate  their  charges,  that  we  are  rate  dis- 
turbers. I  am  sure  that  they  cannot  prove  that  we  are  law-breakers  and 
they  come  here  to  you  and  ask  you  to  do  away  with  our  differential  rates, 
in  order  that  we  shall  be  removed  from  the  field  as  a  competitor.  Now, 
a  good  deal  of  talk  has  been  made  on  the  question  of  robbing  the 
American  workman  by  every  ton  of  freight  and  every  dollar  of  revenue 
earned  by  the  Canadian  Pacific  Railway  on  American  freight.  The  peo- 
ple who  raised  that  cry  do  not  stop  to  explain  that  from  the  districts  out 
of  which  the  Canadian  Pacific  obtain  their  largest  tonnage  of  freight,  that 
over  half  the  distance  that  the  freight  is  hauled  it  is  carried  on  American 
Railways  and  by  American  ships.  They  do  not  stop  to  explain  that  for 
about  every  dollar  that  the  Canadian  Pacific  obtain  on  American  busi- 
ness they  pay  it  back  many  times  over  and  over  to  the  American  people 
in  other  ways.  They  forget  that  the  Canadian  Pacific  Railway  Company 
is  a  very  large  purchaser  on  the  American  market,  and  that  they  spend 
millions  in  the  year  with  the  American  people. 

ARBITRATOR  MIDGLEY— You  spoke  this  morning  about  an 
allowance  made  at  one  time  to  the  Canadian  Pacific.  Was  that  in  the 
nature  of  a  subsidy? 

MR.  KERR — Yes,  that  was  in  the  nature  of  a  subsidy. 

ARBITRATOR  MIDGLEY— At  so  much  by  the  month  or  per  year 
as  the  case  may  have  been. 

MR.  KERR — During  the  year  1891  the  California  lines,  or  the  Trans- 
Continental  lines,  rather,  elected  to  pay  the  Canadian  Pacific  Company 
a  subsidy  as  a  matter  of  experiment.  The  proposition  emanated  from 
the  American  lines.  The  proposition  was  made  and,  after  the  usual  dis- 
cussion pro  and  con,  an  agreement  was  made  whereby  in  lieu  of  the 
differential  the  Canadian  Company  should  receive  a  cash  subsidy.  That 
agreement  ran  through  the  year  1891  and  expired  with  the  year,  when  at 
the  beginning  of  1892  we  again  resumed  work  under  our  differential  rates. 

ARBITRATOR  WASHBURN— During  that  time  did  you  have  in 
no  tariffs? 

MR.  KERR— Yes. 

ARBITRATOR  WASHBURN— Did  you  handle  any  business? 

MR.  KERR — During  that  time  we  had  equal  tariffs  with  the  Ameri- 
can lines  and  during  that  time  we  handled  comparatively  no  business.  I 
might  explain  that  it  was  agreed  that  whatever  business  the  Canadian 
Pacific  carried,  the  revenue  derived  therefrom  should  be  credited  up  to 


33 

this  subsidy  and  during  January  we  carried  $18,000  worth  of  business. 
It  took  that  long  for  the  people  to  find  out  I  presume,  that  they  were 
not  getting  any  special  advantage  on  the  Canadian  Pacific  road  in  the 
way  of  differentials.  The  agreed  subsidy  was  $500,000. 

ARBITRATOR  MIDGLEY— That  is  per  year? 

MR.  KERR — For  each  year,  yes  sir. 

ARBITRATOR  MIDGLEY— You  said  a  moment  ago  that  the 
earnings  or  revenue  would  be  credited  against  the  subsidy. 

MR.  KERR— Yes. 

ARBITRATOR  MIDGLEY— That  was  the  way  on  business  put  on 
the  Pacific  Mail  Steamship  Company's  lines  at  the  discretion  of  the 
railroads. 

MR.  KERR— Yes. 

ARBITRATOR  MIDGLEY— And  the  earnings  or  revenue  of  your 
road  during  such  time  would  be  charged  up  against  the  subsidy? 

MR.  KERR— Yes. 

ARBITRATOR  WASHBURN— Were  the  gross  earnings  charged 
up  against  the  subsidy? 

MR.  KERR — I  believe  so  in  the  case  of  the  Panama  Route;  Mr. 
Stubbs  or  Mr.  Morton  or  Mr.  Truesdale  can  tell  you.  The  gross  earnings 
on  any  business  carried  by  the  Panama  Route  under  the  old  arrangement 
were  the  gross  earnings  charged  up  against  the  cash  subsidy. 

MR.  STUBBS — Will  you  allow  me  to  correct  your  statement? 

MR.  KERR— Yes. 

MR.  STUBBS— It  was  not  a  subsidy. 

MR.  KERR— Space  rental. 

MR.  STUBBS — I  will  explain  it  fully  when  I  get  on  the  floor. 

MR.  KERR — The  Arbitrators  asked  for  the  information. 

MR.  STUBBS — Whatever  the  steamers  earned  was  credited  to  the 
guaranty. 

ARBITRATOR  WASHBURN— I  think,  Mr.  Stubbs,  we  will  wait 
for  your  statement,  until  you  make  your  address. 

MR.  STUBBS— If  that  is  agreeable  to  the  Board,  I  will  do  so 

ARBITRATOR  WASHBURN— All  we  want  is  to  get  the  informa- 
tion some  time;  that  is  all. 

MR.  KERR— We  earned  that  year,  on  business  carried,  $28,075.54 

ARBITRATOR  DAY— During  what  time? 

MR.  KERR— $28,075.54  during  the  year. 

ARBITRATOR  WASHBURN— Of  that  you  earned  $18,000.00  the 
first  month? 

MR.  KERR — Of  that  we  earned  $18,471.64  in  the  month  of  January; 
in  February  we  earned  $6,453.85;  in  March  $2,940.52;  in  April  we  did 
not  get  anything;  in  May  we  earned  $180.53;  m  June  $3-5o;  in  July  we 


34 

did  not  earn  anything;  in  August  we  earned  $10.70;  in  September  $14.80, 
and  that  settled  it.  We  did  not  earn  any  more  after  that. 

ARBITRATOR  WASHBURN— Did  you  maintain  agencies  in  San 
Francisco? 

MR.  KERR— Yes  sir. 

ARBITRATOR  WASHBURN— During  the  entire  year? 

MR.  KERR — Yes  sir,  we  maintained  agencies.  We  did  not  with- 
draw any  agency. 

ARBITRATOR  WASHBURN— You  used  the  same  effort  to  get 
business? 

MR.  KERR — I  would  not  say  that,  naturally;  but  we  did  not  refuse 
any  business  that  came  to  us.  We  had  the  same  facilities,  our  agents  were 
out  in  the  market  working  for  other  business.  They  would  take  San 
Francisco  business  at  even  rates,  but  as  you  see,  they  could  not  get  it. 
The  differential  off,  we  were  out,  clean  out  of  the  business. 

ARBITRATOR  WASHBURN— They  did  solicit  the  business  dur- 
ing that  time? 

MR.  KERR — Yes,  in  a  line  with  their  other  business,  a  canvassing 
agent  going  around  canvassing  for  other  freight,  naturally,  if  he  heard  of 
any  business  going  to  San  Francisco,  he  would  take  it,  he  would  ask  for  it, 
he  would  want  it.  "What  is  your  rate?"  "Our  rate  is  the  same  as  all- 
rail."  "Oh,  no,  you  cannot  have  it;  we  will  give  you  the  other,  but  we 
will  not  give  you  that." 

Now  it  seems  to  me  that  the  whole  history,  all  the  way  through,  in- 
dicates and  emphasizes  the  fact,  that  a  broken  rail-and-water  line  of  the 
same  nature  as  we  operate  by  the  Canadian  Pacific,  cannot  get  business 
without  some  material  advantage  to  offset  the  distance  and  other  things. 

The  question  of  Canadian  roads  being  permitted  to  participate  in 
American  traffic  has  been  a  subject  brought  under  frequent  discussion 
and  in  some  quarters  strong  efforts  have  been  made,  through  the  press 
and  by  various  other  means,  to  prejudice  the  rights  and  privileges  of 
Canadian  roads  in  that  respect,  the  motive  being  to  work  up  public 
opinion  to  a  point  that  will  enable  our  opponents  to  procure  legislative 
action  against  us,  in  order  that  the  Canadian  roads  be  removed  from  the 
field  as  competitors  in  American  traffic.  But,  in  taking  such  action,  our 
opponents  apparently  lose  sight  of  the  fact,  or  at  least  they  do  not  touch 
upon  it,  that  American  roads  participate  in  purely  Canadian  traffic  as 
freely  as  the  Canadian  roads  share  in  American  traffic.  In  fact,  they  have 
received  every  encouragement  from  the  Canadian  Government  and  in 
no  case  has  any  block  been  put  in  their  way.  American  roads  have  re- 
ceived bonuses  to  aid  them  in  building  roads  in  Canada  to  act  as  feeders 
to  United  States  lines,  and  they  do  carry  a  very  large  tonnage  of  traffic 
between  Canadian  points,  through  the  United  States.  The  tonnage  can- 
not be  ascertained.  That  is,  it  could  be  ascertained,  but  not  in  time  for 


35 

this  hearing,  because  it  would  involve  great  clerical  labor,  for  the  statistics 
have  never  been  put  together.  No  records  have  ever  been  kept  by  either 
the  Dominion  Government  or  the  Railways,  but  the  Dominion  Govern- 
ment Statistician,  Mr.  George  Johnson,  prepared  figures  for  the  years 
1868  to  1894,  showing  the  average  value  of  goods  carried  by  American 
roads  from  one  point  in  Canada  to  another,  through  the  United  States 
to  be  $7,500,000.00  per  annum.  Taking  the  same  basis  of  figuring,  indi- 
cates the  value  for  1897  to  be  $8,000,000.00;  that  is,  it  will  get  at  the 
value  of  the  goods  carried,  but  they  cannot  tell  us  the  number  of  tons. 

ARBITRATOR  DAY— Is  that  the  goods  carried  through  the  United 
States  between  points  in  Canada? 

MR.  KERR — Yes  sir;  goods  carried  by  the  American  roads  through 
the  United  States.  The  Northern  Pacific;  Great  Northern;  Michigan 
Central;  Chicago  &  Grand  Trunk;  Wabash;  Chicago  &  Northwestern; 
Chicago,  Milwaukee  &  St.  Paul;  Burlington;  Chicago  Great  Western; 
Spokane  Falls  &  Northern,  all  participate  largely  in  purely  Canadian 
traffic,  moving  between  the  eastern  points  and  the  northwest  and  British 
Columbia,  there  being  no  cry  of  foreign  corporations  preying  upon  Cana- 
dian traffic;  therefore,  in  all  fairness  and  for  the  true  interest  of  the 
United  States,  the  Canadian  roads  should  continue  to  be  permitted  to 
participate  freely  in  the  American  traffic,  conforming  as  they  do,  to  the 
American  laws  governing  its  carriage. 

In  August,  during  the  time  of  the  Denver  meeting,  certain  of  the 
merchants  of  San  Francisco,  claiming  that  they  represented  the  trade  of 
San  Francisco,  addressed  to  the  President  of  the  Canadian  Pacific  Com- 
pany, Sir  William  C.  Van  Home,  a  document  which  reads  as  follows: 

"San  Francisco,  Cal.,  August  2oth,  1898. 
Sir  William  C.  Van  Home, 

President,  Canadian  Pacific  Railway  Co., 

Montreal,  Canada. 
Dear  Sir: — 

At  a  meeting  of  duly  authorized  delegates  from  the  principal 
jobbing  interests  and  Associations  of  this  city,  held  on  the  i8th  of 
this  month,  the  following  resolution  was  unanimously  passed: 

'Whereas,  the  present  system  of  rate-making  on  Trans- 
Continental  shipments  to  San  Francisco  enforced  by  the 
Canadian  Pacific  Railway  is,  in  our  opinion,  prejudicial  to 
the  business  interests  of  San  Francisco  and  the  Pacific  Coast 
generally,  inasmuch  as  said  system  occasions  instability  of 
Trans-Continental  freight  rates,  thereby  placing  the  value 
of  our  stocks  of  goods  in  jeopardy,  and 

Whereas,  the  other  railways  occupying  a  position,  so  far 
as  San  Francisco  traffic  is  concerned,  analogous  to  that  of 


36 

the  Canadian  Pacific  Railway,  are  maintaining  the  rates 
adopted  by  the  American  Trans-Continental  Railways  as 
shown  in  Trans-Continental  Freight  Bureau  Westbound 
Tariff  No.  i-C,  be  it 

Resolved:  That  a  Committee  consisting  of  one  from 
each  and  every  jobbing  interest  represented  at  this  meet- 
ing be  selected  by  the  Chairman  to  give  expression  to  these, 
our  views  to  the  Canadian  Pacific  Railway  Company, 
through  its  President,  Sir  William  C.  Van  Home,  and  to 
request  that  said  Company  adopt  a  system  of  rate-making 
to  San  Francisco  that  will  relieve  the  situation  of  the  pres- 
ent precarious  conditions  and  maintain  Trans-Continental 
freight  rates  on  a  firm  basis,  believing  that  such  an  arrange- 
ment will  redound  to  the  best  interests,  not  alone  to  the 
mercantile  community  of  the  Pacific  Coast,  but  to  the 
Canadian  Pacific  Railway  as  well/ 

All  of  which  is  respectfully  submitted,  with  the  request  that  you 
kindly  acknowledge  receipt  of  this  communication,  and  thereby 
oblige,  Yours  truly, 

H.  D.  Loveland, 
For  Wholesale  Grocer  Assn.  of  Cal. 

W.  R.  Wheeler, 
For  Pacific  Coast  Hdw.  &  Metal  Assn. 

Chas.  R.   Havens, 
For  Wholesale  Dry  Goods  Traf.  Assn.,  S.  F. 

L.  Guggenheim, 
For  Wholesale  Drug  Trade  of  California. 

A.  G.  Towne, 
For  Wholesale  Paper  Trade  of  Pac.  Coast. 

Brace  Hayden, 
Chairman  of  General  Meeting." 

Now  gentlemen,  this  is  a  document  issued  by  the  gentlemen  named, 
who  say  they  represent  the  trade  of  San  Francisco  and  California.  In 
some  cases  they  cover  the  whole  state;  in  other  cases  they  are  more 
modest  and  cover  only  San  Francisco.  And  among  other  things  they 
state  that  other  lines  are  maintaining  the  published  tariff  of  Trans-Con- 
tinental rates  and  that  the  differential  rates  of  the  Canadian  Pacific  are  a 
disturbing  element  in  the  market;  that  were  it  not  for  that,  these  gen- 
tlemen would  have  a  very  happy  time  of  it.  They  would  know  just  ex- 
actly what  they  had  to  pay,  nobody  else  was  reducing  rates  or  carrying  at 
less  than  the  Trans-Continental  tariffs  and,  therefore,  they  desired  a 
stability  of  rates  that  they  might  know  just  where  they  were  all  the  time. 
Now,  it  seems  to  me  an  odd  thing  that  some  of  these  gentlemen  while 
they  were  forwarding  a  statement  of  this  kind  to  our  President  were 


37 

at  the  same  time  very  actively  negotiating  with  our  representative  in 
San  Francisco,  with  a  view  of  breaking  down  his  differential  rates.  In 
other  words,  he  could  not  get  their  business  at  his  regular  differential 
rates  because  the  other  fellows  were  meeting  those  differential  rates  and 
knocking  them  out.  Now,  in  a  statement  from  our  representative  in  San 
Francisco  in  this  connection,  he  specifies  Mr.  Wheeler,  who  signs  this 
document  on  behalf  of  the  Pacific  Coast  Hardware  &  Metal  Association 
and  states  that  not  more  than  two  weeks  prior  to  the  date  of  this  docu- 
ment he  called  upon  our  representative  and  informed  him  that  he  was 
figuring  on  having  a  car  of  enameled  ware  shipped  to  his  firm  from 
Wisconsin  and  desired  our  representative  to  name  the  lowest  rate  via  our 
Vancouver  route.  Our  man  named  him  our  regular  differential  rate  of 
90  cents  per  hundred  pounds,  carload.  To  this  he  remarked  that  hie 
would  be  obliged  to  do  better  than  that  because  the  all-rail  lines  had  made 
him  a  90  cent  rate  already.  And  this  is  the  emaculate  gentleman  who 
subscribes  his  name  to  a  document  asserting  that  the  other  lines  were 
maintaining  rates  and  the  Canadian  Pacific  differentials  were  a  disturb- 
ance on  the  market.  Mr.  Wellman,  who  is  a  director  of  one  of  these  As- 
sociations, has  asserted  that  he  cannot  continue  patronizing  the  Canadian 
Pacific  Company,  owing  to  the  all-rail  lines  meeting  our  differential 
rates;  in  other  words,  they  meet  the  differential  and  then  we  do  not  get 
any  business.  Now,  I  am  going  to  trouble  you  with  the  reply  made  by 
our  Vice-President  to  this  communication: 

"Montreal,  29th  August,  1898. 
Brace  Hayden,  Esq., 

Chairman  of  General  Meeting. 
Messrs.  H.  D.  Loveland,  Chairman  Committee, 

W.  R.  Wheeler, 

Chas.  R.  Havens, 

L.  Guggenheim, 

A.  G.  Towne,  San  Francisco,  Cal. 

Dear  Sirs: — 

Referring  to  your  letter  gf  the  2oth  inst.,  addressed  to  the  presi- 
dent of  this  Company  in  which  you  refer  to  a  resolution  passed 
at  a  meeting  of  delegates  from  the  principal  jobbing  interests  and 
Associations  of  San  Francisco. 

The  preambles  to  the  resolution  as  quoted  in  your  letter  recite 
the  fact  that  the  present  system  of  rate-making  on  Trans-Con- 
tinental shipments  to  San  Francisco  enforced  by  the  Canadian 
Pacific  Railway  is,  in  their  opinion,  prejudicial  to  the  business 
interests  of  San  Francisco  and  the  Pacific  Coast  generally,  inas- 
much as  the  said  system  occasions  instability  of  freight  rates, 
thereby  placing  the  value  of  your  stocks  of  goods  in  jeopardy,  and 
that  the  other  railways  occupying  a  position,  so  far  as  San  Fran- 


38 

cisco  traffic  is  concerned,  analogous  to  that  of  the  Canadian  Pa- 
cific are  maintaining  the  rates  adopted  by  the  Trans-Continental 
railways,  and  the  resolution  itself  is  in  the  nature  of  a  request  that 
this  Company  adopt  a  system  of  rate-making  to  San  Francisco  that 
will  relieve  the  situation  and  maintain  Trans-Continental  freight 
rates  on  a  fair  basis. 

I  beg  to  say  in  reply  that  this  company  heartily  concurs  in  the 
opinion  that  these  periodical  disturbances  in  rates  are  not  only  a 
source  of  serious  loss  to  the  railway  companies  but  are  injurious 
to  general  trade  interests,  and  we  shall  be  glad  at  all  times  to 
co-operate  with  you  and  others  in  endeavoring  to  secure  something 
in  the  nature  of  stability. 

We  take  exception,  however,  to  the  statements  made  in  your 
resolution.  The  Canadian  Pacific  Railway  has  not  now  and  never 
has  had  any  system  of  rate-making  different  from  that  of  the  other 
Trans-Continental  lines,  and  the  instability  of  Trans-Continental 
freight  rates,  past  and  present,  cannot  in  any  manner  be  charged 
to  this  Company.  The  rates  to  and  from  San  Francisco  and  other 
points  in  California  were  agreed  upon  by  the  several  railways  and 
tariffs  were  published  in  accordance  with  that  agreement.  The 
Canadian  Pacific,  which  is  an  important  factor  in  all  Pacific  Coast 
business,  was,  because  of  certain  disabilities  under  which  it  labored 
in  competition  with  the  all-rail  lines,  accorded  the  right  by  unani- 
mous consent  to  quote  Trans-Continental  rates  to  and  from  Cal- 
ifornia points  on  a  basis  10%  lower  than  the  all-rail  lines.  The 
Canadian  Pacific  has  done  this  and  nothing  more;  indeed,  it  has 
lost  thousands  of  tons  of  traffic  because  its  traffic  officers  were 
not  permitted  to  disregard  the  published  tariff  and  quote  rates 
sufficiently  low  to  meet  the  improper  and  illegal  concessions  and 
reductions  made  by  the  other  railways  centering  on  San  Francisco. 

Surely  your  Committee  is  aware  that  the  other  railways  oc- 
cupying a  position,  so  far  as  San  Francisco  traffic  is  concerned, 
analogous  to  that  of  the  Canadian  Pacific  Railway,  are  not  main- 
taining the  tariff  rates,  and  have  not  been  for  some  time  past.  One 
at  least  of  your  Committee  must  have  known  this  from  the  fact 
that  when  he  had  a  carload  of  enamel  goods  to  be  shipped  from 
Wisconsin,  about  two  weeks  before  the  date  of  your  meeting,  and 
was  quoted  by  our  Agent  in  San  Francisco  a  rate  of  ninety  cents 
per  hundred  pounds,  being  our  agreed  tariff  rate,  he  informed  our 
Agent  that  if  the  Canadian  Pacific  desired  to  get  the  business, 
they  must  quote  a  lower  rate  because  the  all-rail  lines  had  made 
him  a  ninety-cent  rate,  a"  reduction  of  10%  from  the  tariff  of  the 
all-rail  lines.  We  have  in  our  possession  the  affidavit  (??)  of  a 
prominent  member  of  your  Association,  although  not  a  member 


39 

of  the  Committee,  that  he  is  unable  to  do  any  business  by  way  of 
the  Canadian  Pacific,  because  that  the  all-rail  lines  are  disregarding 
their  tariffs  and  quoting  differential  rates.  We  know  quite  well 
that  the  unfortunate  conditions  to  which  you  refer  do  exist,  and  we 
are  in  sympathy  with  your  efforts  to  change  them,  but  you  will 
pardon  me  if  I  mention  the  fact  that  you  are  commencing  at  the 
wrong  end.  The  remedy  should  be  applied  right  at  home.  If  the 
merchants  of  San  Francisco  will  notify  the  Southern  Pacific  and 
all  other  rail  lines  they  will  decline  to  ship  any  goods  over  their 
lines  at  rates  below  the  published  tariff  there  will  be  no  further 
difficulty. 

It  will  be.  rather  a  novel  manner  in  which  to  deal  with  this 
vexed  question,  but  I  have  no  doubt  that  it  will  be  effective. 

It  has  been  the  fashionable  thing  for  many  years  with  certain 
other  railway  companies  to  attempt  to  make  the  Canadian  Pacific 
the  scapegoat  for  the  demoralization  periodically  resulting  from 
their  own  unbusiness-like  and  dishonest  practices,  and  for  this 
purpose  they  have  resorted  to  every  avenue  of  publicity  available 
from  one  end  of  the  country  to  the  other.  It  is,  however,  an  estab- 
lished fact  that  whenever  there  has  been  a  searching  inquiry  before 
any  Commission  or  Traffic  Association  these  charges  have  been 
exploded,  and  in  no  single  instance  has  the  Canadian  Pacific 
been  found  to  be  the  aggressor. 

Yours  truly, 

(Signed)  T.  G.  Shaughnessy, 

Vice-President." 

Now,  as  against  this  petition  or  communication  forwarded  to  our 
President,  as  representing  the  trade  of  San  Francisco,  and  in  some  cases 
the  whole  trade  of  California,  we  have  a  long  list  of  letters  here  stating 
that  without  a  differential  inducement,  we  have  no  hope  of  getting  busi- 
ness in  San  Francisco. 

The  Arnold  Hardware  Company,  of  San  Francisco,  write  as  follows, 
under  date  of  September  I3th: 

"We  hope  that  the  report  circulated  that  your  Company  is  to  be 
deprived  of  its  differential  rates  into  San  Francisco  is  not  true,  as  we  are 
very  much  in  need  of  such  competition.  You  certainly  cannot  expect  us 
to  route  any  freight  traffic  over  your  lines  at  the  same  rates  as  carried 
by  all-rail  lines,  for  the  reason  that  a  longer  time  is  required  in  delivery, 
and  the  infrequent  service  by  steamer  from  Vancouver  to  San  Francisco. 
We  would  very  much  regret  if  this  competition  should  be  discontinued. 
Kindly  advise  us." 


40 

William  Davis  &  Son,  San  Francisco,  Manufacturers  and  Importers 
of  harness,  saddles  and  saddlery,  write  us:  "We  desire  to  patronize  the 
Canadian  Pacific  Railway  Company  in  freight  matters  into  San  Francisco. 
We  like  some  competition — an  escape  valve  of  some  kind — but  we  think 
since  the  route  over  your  line  is  long  and  circuitous  that  your  rates  should 
be  less  anyway.  If  we  have  to  pay  your  company  the  same  rates  as  the 
direct  lines,  we  could  not  promise  you  any  business." 

From  M.  Ehrman  &  Company,  Importers  and  Wholesale  Grocers: 
"Replying  to  yours  of  even  date  inquiring  'if  this  company  were  deprived 
of  its  special  differential  rates  on  freight  traffic  westbound  on  the  class 
of  goods  that  are  got  in  by  your  firm,  could  you  consistently  ship  your 
freight  over  our  line  at  same  rates  as  by  standard  lines?' — We  would  say 
that  owing  to  the  fact  that  it  requires  a  longer  time  to  deliver  goods  by 
your  company  than  by  all-rail  lines,  we  cannot  consistently  do  so/' 

From  W.  P.  Fuller  &  Company,  Paints,  Oils  and  Glass,  San  Fran- 
cisco: "Replying  to  your  inquiry  as  to  whether  we  could  ship  freight 
over  your  road  at  the  same  rates  as  all-rail  routes,  we  beg  to  say  that 
taking  into  consideration  the  length  of  time  required  for  delivery  and  the 
danger  from  damage  and  leakage  over  your  road,  owing  to  the  transfer, 
we  would  not  care  to  give  you  the  business  at  the  same  rates." 

From  George  W.  Gibbs  &  Company,  San  Francisco:  "In  answer  to 
your  inquiry  of  today  as  to  whether  we  would  ship  by  Canadian  Pacific 
Railroad  providing  the  rate  is  the  same  as  American  Roads,  we  answer, 
no,  for  the  reason  that  merchandise  in  transit  via  Canadian  Pacific  Rail- 
road consumes  about  three  weeks,  whereas  the  American  roads  average 
delivery  in  about  15  days.  The  transfer  at  Vancouver  from  rail  to  steamer 
necessitates  a  certain  peril  to  the  class  of  material  which  we  are  in  the 
habit  of  shipping  by  rail." 

From  E.  A.  Howard  &  Company,  Carriage  Materials,  Hardwood 
and  Lumber,  San  Francisco:  "It  is  reported  that  your  company  will 
not  be  permitted  its  differential  rates.  Should  such  be  the  case,  we  can- 
not continue  our  present  relations  with  your  company.  You  cannot 
expect  our  business  at  even  rates  with  the  all-rail  lines.  It  takes  your 
company  ten  days  longer  to  deliver  goods  here,  and  the  infrequent  steam- 
ship service  between  Vancouver  and  San  Francisco  will  certainly  compel 
us  to  ship  by  other  lines. 

We  find  your  competition  very  necessary  here,  but  at  even  rates  you 
cannot  secure  any  of  our  traffic,  which  we  regret  very  much." 

From  W.  H.  Stanley,  Pacific  Coast  Selling  Agent,  Eastern  Manu- 
facturers: "You  will  please  be  advised  that  it  is  rumored  an  attempt  is 


being  made  to  deprive  the  Canadian  Pacific  Railway  of  its  differential 
rates  of  freight  tariff  for  San  Francisco.  I  hope  that  such  is  not  the  case 
and  that  you  will  be  allowed  the  usual  differential,  so  as  to  enable  the 
competition  of  your  company  to  continue  in  making  San  Francisco  de- 
livery, as  such  competition  is  very  much  needed  in  the  interest  of  trade. 

Trusting  that  your  company  will  be  enabled  to  continue  business 
here,  as  they  are  the  only  competitive  company,  I  am,  Yours  very  truly." 

From  Stevenson  &  Company,  Fancy  Goods,  Stationery,  Cutlery,  No- 
tions and  Toys,  San  Francisco:  "We  hope  that  the  report  circulated 
that  your  company  is  to  be  deprived  of  its  differential  rates  into  San 
Francisco  is  not  true,  as  we  are  very  much  in  need  of  such  competition. 
You  certainly  cannot  expect  us  to  route  any  freight  traffic  over  your  line 
at  the  same  rates  as  carried  by  all-rail  lines,  for  the  reason  that  a  longer 
time  is  required  in  delivery  and  the  infrequent  service  by  steamer  from 
Vancouver  to  San  Francisco. 

It  would  be  very  much  regretted  should  such  competition  now  offered 
by  you  be  discontinued,  as  the  trade  circles  in  San  Francisco  are  very 
much  in  need  of  the  Canadian  Pacific  competition  into  San  Francisco. 
Please  advise." 

From  Woodin  &  Little,  San  Francisco,  Gasoline  Engines,  Road 
"Pumps,  Windmills  and  Tanks:  "'It  is  reported  that  an  effort  is  being 
made  to  deprive  your  company  of  the  differential  rate.  We  should  be 
very  sorry  to  see  this,  as  we  very  often  find  it  very  important  to  our  trade 
to  avail  ourselves  of  this  10  per  cent  less  rate  than  on  all-rail  lines.  Under 
the  one  rate  we  could  not  patronize  your  company,  owing  to  the  longer 
time  it  requires  to  deliver  your  goods  here,  and  the  steamship  transfer 
from  Vancouver." 

From  Phelps  &  Arnold,  San  Francisco:  "We  understand  that  an 
effort  is  to'  be  made  to  deprive  your  company  of  its  differentials  on  over- 
land through  freights.  We  sincerely  hope  that  this  may  be  avoided  and 
that  you  will  be  able  to  continue  to  make  us  the  usual  10  per  cent  allow- 
ance from  Trans-Continental  tariff,  otherwise  it  would  be  to  our  interest 
to  ship  entirely  from  the  East  via  shorter  and  all-rail  lines  that  are  able 
to  make  better  time  and  bring  us  our  through  freight  in  slightly  better 
order,  as  one  transfer  and  one  extra  handling  is  thus  avoided." 

Then  we  have  merchants  in  Chicago  and  Milwaukee  who  do  not 
agree  with  the  statements  made  by  these  gentlemen  of  San  Francisco,  that 
the  Canadian  Pacific  differentials  should  be  done  away  with. 

The  Edward  P.  Allis  Company,  Milwaukee:  "Referring  to  the  ques- 
tion of  differentials  on  traffic  to  San  Francisco  would  state  that  if  your 
company  withdraws  such  differentials  to  San  Francisco  it  will  not  be 


42 

possible  for  us  to  give  you  any  of  our  business,  because  the  cost  of 
boxing  such  articles  as  may  be  injured  by  sea-water  would  not  warrant 
us  in  giving  you  such  traffic.  You  are  doubtless  aware  that  when  you 
ship  by  all-rail  the  entire  distance  to  San  Francisco  our  machinery  can  be 
loaded  on  cars  at  the  warehouse  and  go  through  without  transfer,  but 
where  your  line  is  used  and  steamer  beyond  we  have  to  make  an  allow- 
ance in  cases  of  boxed  articles  that  are  liable  to  rust  if  they  come  in  con- 
tact with  salt  water.  So  that  if  you  desire  to  secure  any  portion  of  our 
San  Francisco  business  you  must  not  attempt  to  withdraw  your  differ- 
ential." 

The  American  Cereal  Company,  Manufacturers  of  Oatmeal  Flour  and 
Cereal  products,  Chicago,  111.:  "Answering  yours  of  Sept.  13,  relative  to 
forwarding  business  via  your  line  for  San  Francisco,  we  do  not  feel  that 
we  would  be  justified  in  sending  business  by  your  road  if  the  present  dif- 
ferentials were  withdrawn." 

N.  K.  Fairbank  &  Company,  Chicago:  "Replying  to  your  favor  of 
the  loth  inst.,  we  do  not  think  that  on  San  Francisco  business  from  Chi- 
cago and  St.  Louis,  we  could  consistently  pay  you  all-rail  rates,  when  you 
break  bulk  and  use  water  for  part  of  the  distance;  we  would  naturally 
expect  some  kind  of  a  water  differential." 

National  Linseed  Oil  Company,  Chicago:  "I  am  in  receipt  of  your 
favor  of  the  I2th  of  September,  and  have  noted  contents.  In  reply  will 
say  that  if  your  differential  should  be  withdrawn  we  could  not  consistently 
favor  you  with  any  of  our  business  to  the  Pacific  Coast,  on  account  of  the 
longer  route  and  the  water  haul.  Should  the  differential  be  withdrawn 
we  will  have  to  give  our  business  to  the  all-rail  lines." 

The  Schlitz  Brewing  Company,  Milwaukee:  "We  refer  to  your  com- 
munication regarding  beer  shipments  to  San  Francisco  via  Vancouver. 
We  are  unable  to  ship  beer  to  San  Francisco  via  your  line  if  rates  are 
the  same.  Without  your  differential  we  do  not  think  we  can  induce  our 
San  Francisco  customers  to  allow  shipments  to  come  your  way  as  it  takes 
from  13  to  1 6  days  for  a  car  of  beer  to  reach  that  point  via  Vancouver, 
and  besides  this  there  is  three  times  as  much  handling  of  shipments  via 
your  line  as  there  is  if  the  shipment  went  via  one  of  the  direct  lines.  The 
beer  has  to  be  unloaded  from  the  cars  onto  the  boat,  and  unloaded  again 
from  boats  at  San  Francisco  which  always  causes  more  or  less  damage, 
and  you  can  readily  see  why  we  cannot  promise  you  any  business  without 
your  differential." 

Stein  Hirsh  &  Company,  Chicago,  Corn,  Wheat,  Potatoes  and  Starch : 
"Replying  to  your  favor  of  the  gth  inst.  During  the  past  we  have  been 


43 

giving  you  our  shipments  to  San  Francisco  although  many  of  our  cus- 
tomers urged  us  to  ship  by  other  lines.  We  have  tried  to  change  their 
ideas,  but  could  not  do  so  except  with  the  usual  difference  in  freight. 
Owing  to  this  fact  we  are  sorry  to  say  we  could  not  very  well  route  our 
shipments  via  your  line  without  said  differential." 

Washburn  &  Moen  Manufacturing  Company,  Chicago,  Manufactu- 
rers of  Iron,  Steel  and  Copper:  "In  reply  to  your  letter  of  September 
9th,  addressed  to  the  writer,  will  say  that  as  a  general  proposition  it  will 
be  impossible  for  me  to  favor  your  line  with  any  of  our  shipments  to  San 
Francisco,  especially  when  contemplating  the  water  haul  on  equal  rate 
with  the  direct  all-rail  lines.  This  position  we  think  you  will  agree  is  a 
most  natural  one  on  our  part,  otherwise  can  assure  you  of  our  deep 
obligation  to  you  and  our  highest  appreciation  for  all  favors  that  you  have 
extended  to  us  during  the  past." 

The  American  Straw  Board  Company,  Chicago :  "Replying  to  yours 
of  the  9th.  There  is  a  very  serious  objection  to  routing  business  Cana- 
dian Pacific  on  account  of  the  delay  necessary  in  getting  goods  through 
on  the  roundabout  road  that  you  follow,  and  for  that  reason  we  cannot 
give  you  any  business  at  equal  prices  with  the  Southern  Pacific  or  any  of 
the  other  direct  roads  to  the  Coast." 

American  Steel  and  Wire  Company,  Chicago:  "Answering  your 
personal  favor  of  the  9th  inst.,  asking  if  we  could  continue  to  give  you  a 
share  of  our  business  to  San  Francisco  in  case  your  present  differential 
of  10  per  cent  over  the  all-rail  routes  were  withdrawn.  Under  normal 
conditions  I  would  say  on  an  even  basis  you  could  expect  very  little  ton- 
nage from  us  because  we  find  your  route  is  too  slow,  and  our  shipments 
reach  destination  in  much  worse  condition  than  when  we  ship  by  the 
direct  all-rail  routes.  Our  trade  on  the  Coast  object  very  strongly  to  our 
shipping  via  your  line  as  it  is.  Our  Pacific  Coast  Agent  writes  under  date 
of  August  27th  as  follows: 

'Regarding  the  various  routes  and  advantages  or  otherwise  the 
Canadian  Pacific  is  decidedly  objectionable,  owing  to  the  various 
handlings  which  rack  and  break  up  our  kegs  badly,  and  shipments 
arrive  in  bad  form.  This  applies  to  both  nails  and  wire.  The 
direct  all-rail  routes,  of  course  place  stock  here  in  the  best  condi- 
tion.' 

This  I  think  will  fully  answer  your  question." 

From  Barrett  Manufacturing  Company,  Chicago:  "Replying  to 
yours  of  the  9th  inst.,  concerning  San  Francisco  business,  will  state  that 
your  line  is  so  much  longer  and  requires  at  least  five  days  more  time 


44 

than  the  all-rail  route  and  owing  to  the  fact  that  you  transfer  to  a  water 
line  which  damages  our  goods  more  or  less,  we  certainly  would  not 
favor  you  with  our  business  on  an  even  basis  against  the  all-rail  lines. 

The  policy  of  our  institution  is  to  ship  all-rail  for  the  reason  that  the 
goods  reach  destination  in  much  better  condition  and  quicker  time.  Un- 
less there  is  enough  difference  in  the  charges  to  force  us  to  ship  via  rail- 
and-water  in  order  to  market  our  goods  against  our  competitors,  we 
would  use  the  all-rail  route." 

From  Crane  Co.,  Chicago:  "In  reply  to  the  question  asked  in  your 
personal  letter  of  the  9th  inst.  beg  to  say  that  in  the  event  of  your  not 
having  any  differential  on  San  Francisco  business,  we  could  not,  in  justice 
to  our  branch  house  at  San  Francisco,  favor  you  with  a  share  of  our  busi- 
ness as  against  the  direct  all-rail  lines.  Even  with  your  differential,  our 
San  Francisco  people  have  frequently  in  the  past,  objected  to  shipments 
by  your  line,  on  account  of  a  longer  time  en  route,  and  the  transfers." 

From  Robert  Crooks  &  Co.,  Chicago:  ''Referring  to  your  personal 
note  of  the  I2th  in  connection  with  San  Francisco  business.  Knowing 
as  we  do,  that  you  at  the  present  time  enjoy  a  differential  rate  on  account 
of  the  longer  route,  and  the  necessity  of  trans-shipping,  I  can  state  to 
you  definitely  that  unless  such  a  differential  existed  we  could  not  afford 
to  send  a  single  package  of  our  goods  by  your  line,  for  if  we  could  for- 
ward at  the  same  rates  all-rail,  it  would  save  three  handlings,  which  is 
a  very  serious  matter  in  connection  with  tin  plates." 

From  Fraser  &  Chalmers:  "Answering  your  letter  of  September 
9th,  regarding  San  Francisco  business  and  business  to  points  in  Califor- 
nia via  San  Francisco.  We  do  not  believe  at  even  rates  we  could  get 
any  of  our  customers  to  consent  to  the  shipment  of  their  freight  via  Van- 
couver, thence  via  boat  to  San  Francisco,  as  aside  from  the  difference  in 
time,  this  route  would  involve  two  transfers  at  least,  which,  with  the  heavy 
machinery  such  as  we  ship,  is  objectionable,  whereas  by  the  direct  line 
there  would  be  no  transfer  of  carload  shipments.  In  view  of  this  we  do 
not  believe,  if  the  differential  is  withdrawn,  you  could  expect  to  do  any 
of  our  business  for  California  points." 

From  The  Glucose  Sugar  Refining  Company:  (W.  J.  Gorman,  Traffic 
Manager.)  "Replying  to  your  favor  of  the  9th  inst.  with  reference  to 
San  Francisco. business.  In  the  event  of  your  withdrawing  your  differen- 
tial rate  to  San  Francisco  we  will  be  unable  to  favor  your  line  with  any 
business  to  this  point." 

From  Pabst  Refrigerator  Line:  (By  T.  F.  Howe,  General  Manager.) 
"Your  favor  of  the  9th  inst.  at  hand,  asking  if  we  would  be  agreeable  to 
shipping  beer  to  San  Francisco  at  the  same  rates  as  via  the  direct  lines. 


45 

In  reply  would  state  that  we  certainly  would  not  be  in  favor  of  making 
shipments  via  your  line  to  San  Francisco  at  the  same  rates  as  made  by 
the  direct  lines." 

From  Swift  &  Company:  "Answering  your  enquiry  of  the  9th;  if 
the  C.  P.  R.  Line  did  not  have  a  differential  rate  from  Chicago  and  St. 
Paul  to  San  Francisco,  we  would  not  be  inclined  to  give  you  any  business 
as  against  all-rail  lines." 

From  St.  Charles  Condensing  Co.:  "Replying  to  your  favor  of  the 
9th,  we  should  be  sorry  to  hear  that  you  did  not  have  a  differential  to 
San  Francisco  as  it  would  be  impossible  for  us  to  give  you  any  business 
to  that  point  if  we  had  to  pay  the  same  rate  as  the  all-rail  lines  charge. 
The  water  transfer  spoils  our  packages  to  some  extent  and  we  should  not 
want  to  undertake  it  unless  some  saving  were  to  be  had,  to  say  nothing  of 
the  longer  time  which  often  would  be  an  important  factor." 

MR.  KERR  continued:  Mr.  Chairman,  I  will  not  be  able  to  get 
through  to-night.  As  I  am  not  accustomed  to  talking  so  long  at  any  one 
time  my  throat  is  getting  pretty  well  played  out.  If  it  would  be  agreeable 
to  the  Board  to  adjourn  until  to-morrow  morning — if  not,  of  course  I 
will  continue.  It  is  now  5  o'clock. 

ARBITRATOR  DAY— Mr.  Kerr,  you  referred,  as  a  part  of  your 
case,  to  an  affidavit.  Did  you  file  it  or  did  I  overlook  it? 

MR.  KERR — I  have  not  filed  it,  I  am  looking  for  it  now.  It  is  an  affi- 
davit or  a  statement.  The  word  "affidavit"  is  used  in  our  representative's 
memorandum,  but  I  question  whether  it  is  an  affidavit  really.  It  is  not 
an  affidavit.  The  word  affidavit  is  used  here  in  Mr.  Shaughnessy's  letter 
and  the  word  "affidavit"  was  used  in  the  memorandum  of  our  San  Fran- 
cisco representative,  but  in  reading  it  I  qualified  it  by  saying,  "an  affi- 
davit or  statement,"  because  I  knew  pretty  well  it  was  not  an  affidavit. 
It  was  a  statement  of  some  kind. 

ARBITRATOR  WASHBURN— Well,  if  you  haven't  it  handy,  per- 
haps we  had  better  adjourn  and  you  can  hand  it  to  us  in  the  morning. 

MR.  KERR — It  would  be  a  relief  to  us,  sir,  if  you  would  adjourn. 

ARBITRATOR  WASHBURN— We  will  then  adjourn  until  10 
o'clock  to-morrow  morning. 


46 


Morning  Session,  October  I3th,  1898,  10  A.  M. 

The  Meeting  convened  pursuant  to  adjournment. 

ARBITRATOR  WASHBURN— Mr.  Kerr,  I  think  at  last  evening 
adjournment  you  were  looking  for  a  statement  that  Mr.  Day  had  asked 
for,  a  statement  or  affidavit. 

MR.  KERR — Mr.  Chairman  and  Gentlemen  of  the  Arbitration  Board : 
When  we  closed  last  evening,  I  had  been  citing  the  correspondence  that 
had  passed  between  certain  San  Francisco  merchants  and  the  Executive 
of  the  Canadian  Pacific  Company,  and  in  reading  the  letter  of  our  Vice- 
President  in  connection  with  a  statement  received  from  Wellman,  Peck 
&  Company,  the  word  "affidavit"  was  used.  The  reason  it  is  used  in  Mr. 
Shaughnessy's  letter  is  that  in  a  memorandum  from  our  representative 
in  San  Francisco,  he  calls  it  an  affidavit — I  might  say  he  mis-calls  it  an 
affidavit,  and  in  that  way  the  wrong  term  crept  in.  I  stated  last  evening 
that  before  I  found  the  document  I  felt  pretty  certain  it  was  not  an 
affidavit;  it  was  simply  a  statement.  Therefore,  with  your  permission 
I  will  read  and  file  the  following  communication  (marked  "Exhibit  4") 
from  Wellman,  Peck  &  Company,  Grocers,  San  Francisco,  to  the  rep- 
resentative of  the  Canadian  Pacific  Company  at  San  Francisco: 

"On  account  of  other  Trans-Continental  roads  meeting  your 

differential  rates,  and  as  shipments  routed  by   Canadian  Pacific 

Railroad  have  always  cost  us  ten  per  cent  less  than  when  routed 

by  other  lines,  we  cannot  give  you  the  business  we  would  like  to. 

Respectfully  yours, 

Wellman,  Peck  &  Co., 

Per  W.  B.  Wellman,  Treas." 

Now,  is  that  in  line  with  the  statements  made  by  these  gentlemen  who 
say  they  represent  the  San  Francisco  trade,  that  the  other  lines  were 
maintaining  rates,  their  published  tariff  rates,  while  our  differentials  were 
a  disturbing  element  on  the  market,  and  as  they  desired  a  stability  of 
rates,  they  would  like  very  much  if  we  would  withdraw  our  differentials 
— this  is  the  inference  of  it,  of  course, — and  allow  the  other  lines  to 
carry  all  the  business?  Now,  I  do  not  suppose  it  will  occur  to  the  Board 
that  this  document  is  the  voluntary,  unsolicited  act  of  this  body  of  men, 
as  certainly  it  does  not  occur  to  us  in  that  light.  This  is  the  result 
unquestionably  of  the  inspiration  of  other  people,  other  railroad  people, 


47 

who  are  opposed  to  the  Canadian  Pacific  Company  maintaining  their  dif- 
ferential rates  into  San  Francisco,  and  with  the  document  itself,  or  a 
certified  copy  of  it — anyway  it  bears  the  genuine  signatures  of  the  people 
—I  also  desire  to  file  the  reply  of  our  Vice-President  to  this  communica- 
tion and  also  the  further  reply  of  these  gentlemen  to  our  Vice-President, 
under  date  of  September  I7th:  (marked  "Exhibit  5.") 

"San  Francisco,  Cal.,  Aug.  20,  1898. 
Sir  William  C.  Van  Home,  President, 
Canadian  Pacific  Railway  Company, 

Montreal,  Canada. 
Dear  Sir: 

At  a  meeting  of  duly  authorized  delegates  from  "the  principal 
jobbing  interests  and  Associations  of  this  City,  held  on  the  i8th  of 
this  month,  the  following  resolution  was  unanimously  passed: 

'Whereas,  the  present  system  of  rate-making  on  Trans- 
continental shipments  to  San  Francisco  enforced  by  the 
Canadian  Pacific  Railway  is,  in  our  opinion,  prejudicial  to 
the  business  interests  of  San  Francisco  and  the  Pacific 
Coast  generally,  inasmuch  as  said  system  occasions  in- 
stability of  Trans-Continental  freight  rates,  thereby  placing 
the  value  of  our  stocks  of  goods  in  jeopardy,  and 

Whereas,  the  other  Railways  occupying  a  position,  so 
far  as  San  Francisco  traffic  is  concerned,  analogous  to  that 
of  the  Canadian  Pacific  Railway  are  maintaining  the  rates 
adopted  by  the  American  Trans-Continental  Railways  as 
shown  in  Trans-Continental  Freight  Bureau  Westbound 
Tariff  No.  i-C,  be  it 

Resolved:  That  a  Committee  consisting  of  one  from 
each  and  every  jobbing  interest  represented  at  this  meeting 
be  selected  by  the  Chairman  to  give  expression  of  these,  our 
views  to  the  Canadian  Pacific  Railway  Company,  through 
its  President,  Sir  William  C.  Van  Home,  and  to  request 
that  said  Company  adopt  a  system  of  rate-making  to  San 
Francisco  that  will  relieve  the  situation  of  the  present  pre- 
carious conditions  and  maintain  Trans-Continental  freight 
rates  on  a  firm  basis,  believing  that  such  an  arrangement 
will  redound  to  the  best  interests,  not  alone  of  the  mercan- 
tile community  of  the  Pacific  Coast,  but  to  the  Canadian 
Pacific  Railway  as  well.' 

All  of  which  is  respectfully  submitted,  with  the  request  that  you 


kindly  acknowledge  receipt  of  this  communication,  and  thereby 

oblige, 

Yours  truly, 

(Signed)  H.  D.  Loveland, 
For  Wholesale  Grocer  Assn.  of  Cal. 

W.  R.  Wheeler, 
For  Pacific  Coast  Hdw.  &  Metal  Assn. 

Chas.  R.  Havens, 
For  Wholesale  Dry  Goods  Traf.  Assn.,  S.  F. 

L.  Guggenheim, 
For  Wholesale  Drug  Trade  of  California. 

A.  G.  Towne, 
For  Wholesale  Paper  Trade  of  Pac.  Coast. 

(Committee.) 
Brace  Hayden, 
Chairman  of  General  Meeting." 


"Montreal,  29th  August,  1898. 
Brace  Hayden,  Esq., 

Chairman  of  General  Meeting. 
Messrs.  H.  D.  Loveland,  Chairman  Committee. 
W.  R.  Wheeler,       L.  Guggenheim, 
Chas.  R.  Havens,   A.  G.  Towne, 

San  Francisco,  Cal. 
Dear  Sirs: 

Referring  to  your  letter  of  the  2oth  inst.,  addressed  to  the  Presi- 
dent of  this  Company  in  which  you  refer  to  a  resolution  passed 
at  a  meeting  of  delegates  from  the  principal  jobbing  interests 
and  Associations  of  San  Francisco. 

The  preambles  to  the  resolution  as  quoted  in  your  letter  recite 
the  fact  that  the  present  system  of  rate-making  on  Trans-Con- 
tinental shipments  to  San  Francisco  enforced  by  the  Canadian 
Pacific  Railway,  is,  in  their  opinion,  prejudicial  to  the  business  in- 
terests of  San  Francisco  and  the  Pacific  Coast  generally,  inas- 
much as  the  said  system  occasions  instability  of  freight  rates,  there- 
by placing  the  value  of  your  stocks  of  goods  in  jeopardy,  and  that 
the  other  railways  occupying  a  position,  so  far  as  San  Francisco 
traffic  is  concerned,  analogous  to  that  of  the  Canadian  Pacific  are 
maintaining  the  rates  adopted  by  the  Trans-Continental  railways, 
and  the  resolution  itself  is  in  the  nature  of  a  request  that  this 
Company  adopt  a  system  of  rate-making  to  San  Francisco  that 
will  relieve  the  situation  and  maintain  Trans-Continental  freight 
rates  on  a  fair  basis. 


49 

I  beg  to  say  in  reply  that  this  company  heartily  concurs  in 
the  opinion  that  these  periodical  disturbances  in  rates  are  not 
only  a  source  of  serious  loss  to  the  railway  companies  but  are 
injurious  to  general  trade  interests,  and  we  shall  be  glad  at  all 
times  to  co-operate  with  you  and  others  in  endeavoring  to  secure 
something  in  the  nature  of  stability. 

We  take  exception,  however,  to  the  statements  made  in  your 
resolution.  The  Canadian  Pacific  Railway  has  not  now  and  never 
has  had  any  system  of  rate-making  different  from  that  of  the  other 
Trans-Continental  lines,  and  the  instability  of  Trans-Continental 
freight  rates,  past  and  present,  cannot  in  any  manner  be  charged 
to  this  Company.  The  rates  to  and  from  San  Francisco  and  other 
points  in  California  were  agreed  upon  by  the  several  railways  and 
tariffs  were  published  in  accordance  with  that  agreement.  The 
Canadian  Pacific,  which  is  an  important  factor  in  all  Pacific  Coast 
business,  was,  because  of  certain  disabilities  under  which  it  labored 
in  competition  with  the  all-rail  lines,  accorded  the  right  by  unani- 
mous consent  to  quote  Trans-Continental  rates  to  and  from  Cal- 
ifornia points  on  a  basis  of  10%  lower  than  the  all-rail  lines.  The 
Canadian  Pacific  has  done  this  and  nothing  more;  indeed,  it  has 
lost  thousands  of  tons  of  traffic  because  its  traffic  officers  were  not 
permitted  to  disregard  the  published  tariff  and  quote  rates  suffi- 
ciently low  to  meet  the  -improper  and  illegal  concessions  and  re- 
ductions made  by  the  other  railways  centering  on  San  Francisco. 
Surely  your  Committee  is  aware  that  the  other  railways  oc- 
cupying a  position,  so  far  as  San  Francisco  traffic  is  concerned, 
analogous  to  that  of  the  Canadian  Pacific  Railway,  are  not  main- 
taining the  tariff  rates,  and  have  not  been  for  some  time  past. 
One  at  least  of  your  Committee  must  have  known  this  from  the 
fact  that  when  he  had  a  carload  of  enamel  goods  to  be  shipped 
from  Wisconsin,  about  two  weeks  before  the  date  of  your  meet- 
ing, and  was  quoted  by  our  Agent  in  San  Francisco  a  rate  of  ninety 
cents  per  hundred  pounds,  being  our  agreed  tariff  rate,  he  in- 
formed our  Agent  that  if  the  Canadian  Pacific  desired  to  get  the 
business,  they  must  quote  a  lower  rate  because  the  all-rail  lines  had 
made  him  a  ninety-cent  rate,  a  reduction  of  10%  from  the  tariff 
of  the  all-rail  lines.  We  have  in  our  possession  the  affidavit  of 
a  prominent  member  of  your  Association,  although  not  a  member 
of  the  Committee,  that  he  is  unable  to  do  any  business  by  way 
of  the  Canadian  Pacific,  because  that  the  all-rail  lines  are  disre- 
garding their  tariffs  and  quoting  differential  rates.  We  know 
quite  well  that  the  unfortunate  conditions  to  which  you  refer  do 
exist,  and  we  are  in  sympathy  with  your  efforts  to  change  them, 
but  you  will  pardon  me  if  I  mention  the  fact  that  you  are  com- 


So 

mencing  at  the  wrong  end.  The  remedy  should  be  applied  right 
at  home.  If  the  merchants  of  San  Francisco  will  notify  the  South- 
ern Pacific  and  all  other  rail  lines  they  will  decline  to  ship 'any 
goods  over  their  lines  at  rates  below  the  published  tariff  there  will 
be  no  further  difficulty. 

It  will  be  rather  a  novel  manner  in  which  to  deal  with  this 
vexed  question,  but  I  have  no  doubt  that  it  will  be  effective. 

It  has  been  the  fashionable  thing  for  many  years  with  certain 
other  railway  companies  to  attempt  to  make  the  Canadian  Pacific 
the  scapegoat  for  the  demoralization  periodically  resulting  from 
their  own  unbusinesslike  and  dishonest  practices,  and  for  this  pur- 
pose they  have  resorted  to  every  avenue  of  publicity  available  from 
one  end  of  the  country  to  the  other.  It  is,  however,  an  established 
fact  that  whenever  there  has  been  a  searching  inquiry  before  any 
Commission  or  Traffic  Association  these  charges  have  been  ex- 
ploded, and  in  no  single  instance  has  the  Canadian  Pacific  been 
found  to  be  the  aggressor. 

Yours  truly, 

(Signed)  T.  G.  Shaughnessy, 

Vice-President." 


THE  PACIFIC  COAST  HARDWARE  AND  METAL 
ASSOCIATION. 

San  Francisco,  Sept.  17,  1898. 
(Copy.) 
'T.  G.  Shaughnessy,  Esq., 

Vice-President,  The  Canadian  Pacific  Ry.  Co., 

Montreal,  Canada. 
Dear  Sir: — 

We  are  pleased  to  note  that  your  Company  heartily  concurs  in 
the  opinion  that  these  periodical  disturbances  in  rates  are  not  only 
a  source  of  serious  loss  to  the  Railway  Companies,  but  injurious  to 
general  trade  interests  as  well,  and  we  will  appreciate  your  co- 
operation in  the  endeavor  to  secure  something  in  the  nature  of 
stability. 

We  note  that  you  take  exception  to  the  statement  made  in 
our  Resolution  concerning  the  system  of  rate-making  to  San 
Francisco  via  your  Line,  and  that  you  state  that  the  Canadian 
Pacific  Railway  has  not  now  and  never  has  had  any  system  of 
rate-making  different  from  that  of  the  other  Trans-Continental 
lines. 

Our  understanding  of  the  case  as  set  forth  by  your  tariffs,  is, 


however,  to  the  contrary,  inasmuch  as  you  deduct  10%  from  the 
American  Line  rates — whatever  they  may  be.  If  the  American 
Lines  reduce  their  tariff,  you  reduce  yours  correspondingly;  if 
the  American  Lines  advance  their  tariff,  you  advance  yours  cor- 
respondingly, maintaining  in  any  event  a  differential  via  your  line 
of  10%  from  the  rates  of  the  American  Lines,  thus  forcing  the 
latter  to  charge  a  rate  of  more  than  11%  in  advance  of  your  rates, 
or  to  meet  your  rates,  thereby  causing  a  rate  war. 

We  note  that  you  state  that  the  right  is  accorded  you  by 
unanimous  consent  (presumably  of  the  American  Lines)  to  quote 
Trans-Continental  rates  to  and  from  California  points  on  a  basis 
10%  lower  than  the  all-rail  lines.  Our  information  on  this  point 
fails  to  corroborate  this  statement.  It  so  happens  that  five  of  the 
six  gentlemen  comprising  this  Committee  were  in  attendance 
at  the  meeting  of  the  Trans-Continental  Freight  Bureau,  held  in 
Milwaukee  last  May.  We  are  informed,  on  what  we  consider  un- 
questionable authority,  that  at  that  meeting  a  most  earnest  and 
vigorous  protest  was  entered  by  certain  representatives  of  the 
American  Lines  against  the  system  of  differential  rates  enforced 
by  your  road. 

We  note  that  you  apparently  fail  to  correctly  interpret  the 
analogy  referred  to  in  our  letter  of  August  2Oth,  wherein  we  state 
that,  'other  railways  occupying  a  position,  so  far  as  San  Francisco 
traffic  is  concerned,  analogous  to  that  of  the  Canadian  Pacific 
Railway  are  maintaining  the  rates  adopted  by  the  American  Trans- 
Continental  Railways,  as  shown  in  Trans-Continental  Freight  Bu- 
reau Westbound  No.  i-C.'  To  our  knowledge,  there  are  but  two 
Railway  Lines,  whose  position,  so  far  as  San  Francisco  traffic  is 
concerned,  is  analogous  to  that  of  your  road — viz.:  The  Northern 
Pacific  and  the  Great  Northern  Railways,  both  of  which,  as  you 
are  aware,  terminate  on  Puget  Sound,  and  use  the  Steamships  of 
the  same  Company  used  by  your  road  for  conveying  Trans-Con- 
tinental freight  to  San  Francisco.  We  reiterate  that,  to  our 
knowledge,  these  railways  have  been,  and  are  today,  maintaining 
the  freight  rates  to  San  Francisco  as  shown  in  Tariff  No.  i-C. 

In  addition  to  the  above  lines  there  is  another  railway,  viz., 
that  of  the  Oregon  Railroad  &  Navigation  Co.,  whose  position, 
so  far  as  San  Francisco  traffic  is  concerned,  is  nearly  analogous 
to  that  of  your  own  line,  the  only  difference  being  that  the  O.  R. 
&  N.  Co.'s  rails  do  not  reach  as  far  east,  and  trrey  use  their  own 
steamers  for  landing  freight  in  San  Francisco.  This  Company,  as 
well  as  the  two  first  mentioned  are,  to  our  knowledge,  maintaining 
full  tariff  rates  to  San  Francisco.  We  would  also  call  attention  to 
*he  fact  that  the  Southern  Pacific  Company  does  not  claim  any 


52 

right  to  differentials  via  their  Sunset  Route,  which,  as  you  are 
well  aware,  involves  a  much  longer  sea  voyage,  and  is  quite  as  in- 
direct a  route  to  San  Francisco  as  is  your  own. 

Concerning  that  part  of  your  letter  wherein  you  refer  to 
one  of  our  Committee,  his  reply  to  you,  dated  September  6th,  1898. 
fully  covers  and  eliminates  this  as  a  subject  matter  of  consider- 
ation. 

We  are  thankful  for  the  suggestion  as  to  the  application  of 
the  remedy  for  existing  conditions,  and  would  ask  if  it  would  not 
perhaps  be  well  for  the  merchants  of  San  Francisco  to  apply 
same  by  withholding  their  patronage  from  any  Trans-Continental 
railway  line,  American  or  Foreign,  that  insists  upon  a  differential 
rate,  thereby  jeopardizing  the  stability  of  rates,  and  making  the 
conduct  of  business  in  this  city  extra  hazardous.  We  agree  with 
you  that  this  would  be  a  novel  manner  in  which  to  deal  with  this 
vexed  question,  and  are  glad  to  note  that  you  have  no  doubt  that 
same  would  be  effective.  Plainly  speaking — we  consider  that  'it 
is  a  poor  rule  that  won't  work  both  ways,'  and  if  in  your  opinion, 
it  would  be  effective  when  applied  to  the  Southern  Pacific,  and  all 
other  all-rail  lines,  why  would  it  not  be  equally  effective  when  ap- 
plied to  the  Canadian  Pacific  Railway? 

In  our  opinion,  the  Canadian  Pacific  Railway,  and  its  con- 
nections, should  be  in  equally  as  good  a  position  to  serve  San 
Francisco  in  the  carriage  of  Trans-Continental  freight  as  is  the 
Sunset  Route,  and,  we  are  led  to  believe  would,  at  equal  rates,  get 
a  fair  share  of  San  Francisco  business,  but  at  differential  rates  we 
doubt  if  it  will  be  able  to  maintain  its  past  volume  of  business  to 
this  city. 

We  have  noted,  by  recent  press  dispatches,  with  no  inconsid- 
erable interest  and  satisfaction,  that  your  road  has  agreed  to  the 
abolition  of  differentials  on  Trans-Continental  passenger  business, 
and  sincerely  hope  that  you  will,  in  the  immediate  future,  take  a 
like  stand  as  regards  Trans-Continental  freight  traffic,  believing 
that  such  a  course  would  be  to  our  mutual  interest. 

Hoping  that  we  are  not  presuming  too  much  upon  your  time 
and  good  nature,  and  that  you  will  give  this  communication  your 
kind  consideration,  we  remain 

Yours  very  truly, 

H.  D.  LOVELAND,       For  Wholesale  Grocer  Assn.  of  Cal. 

W.    R.    WHEELER,       For   Pac.    Coast   Hdw.    &    Metal   Assn. 

C.  R.   HAVENS,  For  Wholesale  Dry  Goods  Traf.  Assn.,   S.    R 

L.   GUGGENHEIM,       For  Wholesale  Drug  Trade  of  Calif. 

A.  G.  TOWNE,  For  Wholesale  Paper  Trade  of  Pac.  Coast. 

BRACE  HAYDEN,   CHAIRMAN  of  GENERAL  MEETING." 


53 

In  that  connection  it  is  quite  proper  that  I  should  file  the  original 
letters  (marked  "Exhibit  4j")  received  by  the  Canadian  Pacific  Company, 
letters  from  representatives  and  large  business  houses  in  San  Francisco, 
in  Chicago,  in  Milwaukee  and  in  St.  Charles,  Illinois,  who  all  take  the 
opposite  view  of  the  case  to  that  of  the  gentlemen  who  put  in  this  peti- 
tion (as  representing  the  San  Francisco  trade)  against  our  differentials. 
These  letters  that  were  read  over  to  you  last  night,  and  are  on  the  min- 
utes, all  express  in  a  strong  way,  and  with  no  uncertain  sound,  the  desire 
of  the  trade, — a  large  portion  of  the  trade — that  the  Canadian  Pacific 
position  as  it  stands  today,  with  its  differentials  in  operation  shall  be 
continued  and  not  disturbed. 

Gentlemen,  in  weighing  one,  we  ask  you  to  weigh  the  other  side  of  the 
evidence. 

We  desire  to  file: 


Trans-Continental  Association  Tariff  No.  6,  Westbound, 
effective  March  6th,  1888  (marked  "Exhibit  6"). 

Supplement  No.  i  to  Westbound  Freight  Tariff  No.  6,  effect- 
ive June  20th,  1888  (marked  "Exhibit  7"). 

Supplement  No.  8  to  Westbound  Tariff  No.  18,  effective  Au- 
gust 20th,  1889  (marked  "Exhibit  8"). 

Trans-Continental  Association  Tariff  No.  36,  Westbound,  ef- 
fective July  i8th,  1892  (marked  "Exhibit  9"). 

We  desire  to  file  a  "Report  of  Discussion  on  Question  of  Canadian  Pa- 
cific Differentials,  at  Meeting  of  Trans-Continental  Lines,  held  at  Brown 
Palace  Hotel,  Denver,  Colo.,  August  22nd,  1898,"  (marked  "Exhibit  10") 
and  with  that  a  copy  of  the  resolutions  passed,  along  with  which  we  have 
prepared  a  few  notes,  giving  easy  reference  to  the  points  in  the  proceed- 
ings to  which  we  call  particular  attention.  We  thought  this  was  advisable 
in  order  that  you  gentlemen  might  not  have  to  labor  through  the  whole 
thing  if  you  did  not  want  to. 

It  may  not  be  amiss,  while  we  are  right  here,  to  say  a  few  words  with 
regard  to  a  statement  made  at  that  meeting  by  the  representative  of  the 
Union  Pacific  line,  who  said  in  his  argument  against  the  Canadian  Pa- 
cific Company,  that  during  the  year  1891,  when  we  were  working  under 
a  subsidy — (we  are  not  afraid  to  call  it  a  subsidy;  it  was  one,  just  as  the 
Panama  Route  space  rental,  so-called,  is  a  subsidy) — that  during  that 
year  we  had  carried  more  than  one-half  the  tonnage  necessary, — the 
business  necessary  to  earn  one-half,  50  per  cent  of  the  subsidy  that  the 
lines  agreed  to  allow  us.  And,  although  it  is  not  on  record  the  statement 
was  assented  to  by  other  gentlemen  who  knew  better.  We  will  file  with 
vou  the  official  statements  of  the  Trans-Continental  Association  for  the 


54 

year  1891  covering  this  point,  showing  exactly  what  the  Association  paid 
us  and  showing  also  the  amount  of  business  that  we  carried  during  the 
year;  the  understanding  being  that  whatever  we  carried,  the  revenues 
derived  from  that  business  would  be  credited  up  to  the  lines  who  had 
to  pay  the  money  over.  In  other  words  it  would  be  deducted  from  the 
total  amount  to  be  paid  in  cash.  There  is  one  report  missing,  I  think 
for  the  month  of  January.  No  doubt  Mr.  Countiss,  if  you  deem  it 
necessary  can  supply  that  from  the  records  of  his  office.  But  we  have 
the  record  here  on  this  statement  from  our  own  Audit  office  showing  for 
the  month  of  January  and  for  each  month  what  we  earned,  what  we 
carried,  the  revenue  we  received  and  the  amounts  we  received  each  month 
from  the  Trans-Continental  Association.  We  therefore  file  with  the 
Board  the  proceedings  of  the  Denver  meeting  (previously  marked  "Ex- 
hibit 10"),  and  we  file  the  Trans-Continental  records  along  with  our  office 
abstract  for  the  year  1891  (marked  "Exhibit  n"),  when  we  worked  under 
the  subsidy  from  the  Association  instead  of  our  differentials.  The  change 
from  the  differential  to  the  subsidy  as  I  stated  yesterday  was  the  offer  and 
act  voluntarily  of  the  other  members  of  the  Association.  We  did  not  seek 
it.  They  came  to  us  and  made  the  offer  and,  as  I  said,  after  the  usual 
business  discussion  on  points  of  that  kind  with  which  you  are  all  familiar, 
the  offer  was  finally  made  and  accepted  and  worked  under,  each  party 
keeping  perfect  faith  with  each  other  the  whole  year. 

In  case  you  may  find  it  a  handy  means  of  reference  on  some  points 
in  connection  with  differentials  that  obtain  by  other  lines  cited  yesterday 
and  gone  into  with  considerable  elaboration,  I  desire  to  file  freight  Tariff 
No.  9  (marked  "Exhibit  12"),  by  E.  W.  Beedle,  known  as  "Beedle's 
Freight  Tariff."  It  is  a  small  vest  pocket  affair  used  for  ready  reference. 
It  is  used  by  a  great  many  traffic  officials  and  is  considered  reliable  in  its 
information.  It  is  dated  March  nth,  1898. 

In  connection  with  the  point  I  endeavored  to  make  yesterday  of  the 
frequent  sailings  of  lake  steamers  from  Buffalo  and  Lake  Erie  ports, 
steamers  operating  in  connection  with  railroad  companies,  many  of  them 
— I  think  most  of  them — owned  by  railroad  companies,  forming  what  is 
known  as  the  lake-and-rail  lines,  I  desire  to  file  a  letter  from  R.  H. 
Hebard,  General  Manager  of  the  Minneapolis,  St.  Paul  &  Buffalo  Steam- 
ship Company,  Buffalo,  dated  September  8th,  1898,  (marked  "Exhibit 
13")  which  gives  with  a  good  deal  of  detail  the  operation  of  the  lake 
steamers  and  shows  or  rather  bears  out  my  statement  of  yesterday,  that 
Buffalo  during  the  season  of  navigation  has  pretty  nearly  a  daily  sailing, 
a  daily  boat  service  westward  into  Lakes  Huron,  Michigan  and 
Superior. 

Before  leaving  the  subject  of  differential  lines  and  again  referring 
to  the  point  so  often  made  by  those  who  are  opposed  to  us  on  this  ques- 
tion, that  whatever  may  be  done  in  the  east,  in  Trunk  Line  and  Central 


55 

Traffic  Association  rates  in  regard  to  differentials,  they  are  not  recog- 
nized out  in  the  west  by  anybody,  I  endeavored  to  cite  to  you  yesterday 
several  cases  to  show  that  that  position  was  wrong.  Differentials  do  pre- 
vail out  in  the  west  and  in  the  south,  and  in  the  east  and  in  the  north,  and 
each  point  of  the  compass,  whichever  way  you  look,  you  are  staring  at 
a  differential  line  somewhere,  and  just  to  further  accentuate,  we  have 
the  Morgan  Line  differential  rate,  via  Missouri  Pacific  Line  to  St.  Louis ; 
we  have  a  Savannah  line,  working  up  to  Kansas  City.  I  do  not  want  to 
dwell  on  these  points  or  enlarge  upon  them,  or  any  further  take  up  your 
time;  I  thought  I  would  just  cite  them  and  mention  them  to  strengthen, 
if  possible,  our  position  and  the  statements  we  endeavored  to  make  clear 
yesterday. 

Now,  gentlemen,  with  your  permission,  we  get  back  to  Canada.  We 
have  roamed  all  over  the  United  States  pretty  much,  now  I  am  glad  to 
get  back  home.  In  support  of  the  statement  made  yesterday  of  the  per- 
fect freedom  of  working  enjoyed  by  American  lines  in  Canadian  traffic 
without  bar,  let  or  hindrance,  I  think  I  stated  yesterday  every  important 
town  in  Canada  and  many  that  are  not  important,  carry  the  signs  of 
American  Railroads,  their  offices  being  scattered  on  the  main  streets  of 
said  cities  and  towns;  they  are  there  doing  business  with  perfect  free- 
dom; they  are  there  under  a  welcome  and  no  man  dare  or  desires  to 
make  them  afraid.  They  are  there  as  I  showed  you  yesterday,  with 
differential  rates;  and  as  you  walk  along  the  streets  you  will  find  the 
old  familiar  names  that  are  so  familiar  to  you  and  to  me  and  to  the 
rest  of  us,  of  the  "Burlington";  The  Chicago  &  Northwestern;  The 
Atchison,  Topeka  &  Santa  Fe;  The  Northern  Pacific;  the  Great  North- 
ern ;  The  Union  Pacific ;  and  so  on — you  can  go  to  the  end,  it  is  simply 
a  list  of  the  eastern-middle  states  and  many  of  the  Western  American 
lines.  You  will  find  them  all  there,  not  a  word  being  said  about  preying 
or  trespassing  on  Canadian  traffic.  In  support  of  the  statements  I  made 
concerning  the  value  of  the  goods  carried  by  American  lines,  from  one 
point  in  Canada  to  another  point  in  Canada,  through  the  L^nited  States, 
I  desire  to  file  a  letter  (marked  "Exhibit  14")  from  the  statistician  of 
the  Dominion  Government,  Mr.  George  Johnson,  who  treats  on  the 
subject,  and  also  a  copy  of  an  open  letter  from  Mr.  Edward  Farrar, 
addressed  to  the  Honorable,  the  Chairman  of  the  Committee  on  Inter- 
State  Commerce,  United  States  Senate,  and  dated  "Toronto,  March  3ist, 
1897,"  wherein  you  will  note  the  values — that  these  two  together  will 
give  you  the  values  and  the  manner  in  which  those  values  are  arrived  at. 
The  tonnage  cannot  possibly  be  ascertained  as  it  involves  too  much 
clerical  labor  to  get  it  ready  in  time  for  this  hearing;  in  fact,  it  could 
not  be  gotten  ready  in  time  for  this  hearing  by  any  possibility.  It  is  a 
long  job.  I  will  have  this  typed  for  you,  gentlemen.  I  meant  to  have 
»t  done  this  morning,  but  other  things  intervened.  It  shows  the  man- 


56 

ner  in  which  we  arrive  at  the  percentages  and  get  at  the  value  of  goods 
carried,  from  those  documents. 

ARBITRATOR  WASHBURN— It  is  a  small  matter.  I  do  not  think 
it  is  necessary  to  have  it  typed.  Do  you  want  that  attached  to  the  last 
document  you  filed? 

MR.  KERR — If  you  please.  I  intended  to  have  it  typed.  I  do  not 
like  to  present  you  with  a  rough  thing  like  that. 

I  desire  to  file  the  proceedings  of  Trans-Continental  Association, 
General  Meeting,  New  York,  March  16,  1896,  General  Meeting,  Mil- 
waukee, April  i,  1896;  Rate  Committee  Meeting,  Milwaukee,  March 
30,  1896  (marked  "Exhibit  15").  We  file  this  record  (referring  to  "Ex- 
hibit 15"),  in  order  that  the  Arbitrators  may  be  possessed  of  all  the  facts 
in  connection  with  the  endeavor  to  re-form  the  Trans-Continental  Asso- 
ciation, in  1896,  and  for  the  further  purpose  of  showing  the  manner  in 
which  our  friends  on  the  other  side  of  this  case  desired  to  dispose  of 
our  differentials.  We  had  a  grave  difference  of  opinion,  in  fact  we  had 
a  disagreement  on  the  manner  in  which  these  differentials  should  be 
made.  The  question  as  late  as  1896,  was  not  that  the  Canadian  Pacific 
Company  should  have  no  differential  by  its  broken  line,  but  the  question 
hinged  on  the  amount  of  differential.  The  principle  was  not  touched  on, 
it  was  only  a  question  of  degree.  And  after  a  good  deal  of  discussion, 
you  will  note  the  resolutions  here  that  seem  to  have  disposed  of  our 
case  by  putting  in  a  scale  of  differentials  beginning  at  10  per  cent  and 
scaling  down  to  8  per  cent.  The  basis  of  differentials  was  fixed  on  the 
class  rates,  and  when  this  company  had  agreed  to  take  that  scale  our 
friends  endeavored  to  put  the  class  rates  on  the  basis  that  gave  us  8 
per  cent,  and  then  they  fixed  the  commodity  rates  to  suit  themselves, 
with  the  result,  as  you  can  see,  that  as  the  tonnage  carried  consists  so 
largely  of  commodities — I  suppose  the  class  rates  do  not  represent  more 
than  10  or  15  per  cent — that  by  this  process  we  were  put  down  on  the 
basis  of  8  per  cent.  When  we  came  to  assemble  in  Milwaukee  and  the 
plot  developed,  we  very  naturally  entered  our  usual  mild  objection,  which 
brought  on  further  discussion,  re-opened  the  question  and  finally  we 
made  a  compromise.  In  the  interest  of  peace  and  harmony  the  Can- 
adian Pacific  agreed  to  take  9  per  cent,  but  all  the  same  we  felt  we 
were  not  being  done  justice  to  and  we  felt  then  as  we  feel  now,  that  we 
should  not  have  been  asked  to  lower  our  percentage  of  differentials  below 
10  per  cent. 

CHAIRMAN  WASHBURN— That  compromise  was  accepted  by  the 
American  Association? 

MR.  KERR — Yes  sir;  but  it  never  went  into  effect  for  the  reason  that 
the  Association  was  never  formed  owing  to  objections  raised  by  the 
Receivers  of  the  Union  Pacific.  The  basis  on  which  the  Association 
was  to  have  been  formed  fell  through,  namely;  the  arrangement  for  the 


57 

Panama  route  space  rental,  and  it  never  went  into  effect.  The  Associa- 
tion was  never  formed  and  we  naturally  continued  as  we  are  to-day  on 
our  10  per  cent  basis. 

I  filed  yesterday  a  list  of  so-called  Pier  rates  enjoyed  by  the  Sunset 
line  of  the  Southern  Pacific  Railway  Company — differential  rates.  The 
list  of  commodities,  as  you  have  probably  noticed,  is  very  formidable. 
We  have  no  means  of  knowing  what  it  represents  in  tonnage,  as  carried 
by  the  Sunset  Line.  So  far,  they  have  not  taken  us  into  their  confidence 
in  that  respect.  Perhaps  they  will  take  you  gentlemen  into  their  con- 
fidence and  tell  you  what  tonnage  is  represented  by  the  commodities 
they  carry  under  these  Pier  rates  which  give  them  a  differential  and 
enable  them  to  reach  back  into  the  interior  of  New  York  and  Penn- 
sylvania. I  think  this  very  desirable  information,  because  in  the  dis- 
cussion in  the  Denver  meeting  the  New  York  Pier  rates  were  said  to  be 
put  in  there  to  take  tonnage  as  the  overland  lines  did  not  care  about  it, 
— low  class,  low  quality,  way  down  in  the  scale — something  that  only 
clipper  ships  and  Panama  routes  would  seek  for,  but  the  list  does  not 
seem  to  bear  that  out  in  its  entirety. 

I  have  a  list  of  Trans-Continental  tariffs  here  (marked  "Exhibit  16") 
that  it  might  be  well  to  file  in  order  that  you  may  have  any  information 
you  desire  to  take  from  them. 

Westbound  Tariff  No.  14,  effective  September  ist,  1888. 

Westbound  Tariff  No.  18,  effective  January  ist,  1889. 

Westbound  Tariff  No.  20,  effective  May  27th,  1889. 

Westbound  Tariff  No.  22,  effective  October  ist,  1889. 

Westbound  Tariff  No.  26,  effective  June  i8th,  1890. 

Westbound  Tariff  No.  30,  effective  January  1 5th,  1891. 

Westbound  Tariff  No.  34,  effective  September  2 ist,  1891. 

Westbound  Tariff  No.  T — i,  effective  April  nth,  1893. 

Joint  Westbound  Tariff  of  Northern  Lines,  effective  Oct.  2Oth,  1894. 

Westbound  Tariff  No.  T— 5,  effective  March  5th,  1895. 

Joint  Tariff  of  the  Northern  Lines,  effective  February  22nd,  1896. 

Westbound  Tariff  No.  T — 10,  effective  February  22nd,  1896. 

Sunset  Route  Tariff  No.  C — 13,  effective  November  I7th,  1896. 

Westbound  Tariff  No.  i — A,  effective  June  24th,  1897. 

Joint  Tariff  of  the  Northern  Lines,  effective  August  i5th,  1897. 

Westbound  Tariff  No.  i — B,  effective  December  i5th,  1897. 

Westbound  Tariff  No.  i— C,  effective  June  25th,  1898. 

Eastbound  Tariff  No.  7,  effective  March  loth,  1888. 

Eastbound  Tariff  No.  T — 2,  effective  April  nth,  1893. 

Eastbound  Tariff  No.  T — 7,  effective  June  i7th,  1895. 

Eastbound  Tariff  No.  3 — A,  effective  January  loth,  1898. 


58 

Eastbound  Tariff  No.  3 — B,  effective  July  i6th,  1898. 

Canadian  Pacific  Railway  Circular  No.  10,  effective  Jan.  5th,  1892. 

ARBITRATOR  WASHBURN— Do  these  include  all  those? 

MR.  KERR — Yes  sir.  Now  it  occurs  to  me  that  the  Board  might  de- 
sire to  have  copies  of  the  proceedings  of  the  Trans-Continental  Associa- 
tion during  its  life, — that  is  during  its  term  while  we  were  connected  with 
it.  We  have  the  volumes  here  and  I  thought  that  we  might  give  you  the 
references  and  if  you  desired  to  use  them  you  can  get  them  from  Mr. 
Countiss'  office;  or  if  you  prefer  I  will  give  you  the  volumes  to  be  re- 
turned to  me  later  as  they  are  the  only  record  we  have. 

ARBITRATOR  WASHBURN— We  think  we  do  not  need  those. 
Mr.  Kerr.  If  we  want  them,  we  can  get  them  from  Mr.  Countiss:  you 
need  not  leave  your  copies. 

MR.  KERR — Shall  I  give  you  the  references  and  cite  them? 

ARBITRATOR  WASHBURN— If  you  please,  yes  sir. 

MR.  KERR — Record  of  Proceedings,  Trans-Continental  Associa- 
tion, Nov.  5th,  1887,  to  Jan.  3ist,  1888. 

ARBITRATOR  MIDGLEY— That  is  when  you  began,  or  were  al- 
lowed the  differentials  first? 

MR.  KERR — Yes  sir;  that  is  when  we  were  invited  to  join  the  Trans- 
Continental  Association.  It  was  the  period  at  which  the  Trans-Con- 
tinental Association  was  re-formed.  It  had  been  an  Association  before, 
but  had  gone  to  pieces,  had  dissolved  for  some  reason  or  another  and 
this  was  the  period  at  which  they  re-organized  their  Association  and 
invited  us  to  come  in. 

ARBITRATOR  WASHBURN— Can  you  give  us  that  reference  on 
a  sheet  by  itself? 

MR.  KERR— Yes  sir. 

ARBITRATOR  WASHBURN— Instead  of  our  having  to  pick  it  out 
from  the  proceedings. 

MR.  KERR— Yes  sir. 

The  list  of  references  (marked  "Exhibit  17")  was  filed  with  the  Board. 

MR.  KERR — The  several  points  I  have  endeavored  to  make  in  pre- 
senting this  case  may  be  summarized  as  follows: 

First,  I  endeavored  to  treat  of  the  general  principle  in  connection 
with  application  of  differential  rates  via  broken  rail-and-water  routes. 

Second,  I  dwelt  with  the  history  of  differentials  allowed  to  the  Can- 
adian Pacific  since  they  were  invited  to  join  the  Trans-Continental  Asso- 
ciation organized  in  November,  1887. 

Third,  I  have  explained  the  guarantee  of  an  agreed  amount  during 
the  year  1891  in  lieu  of  differentials  and  the  subsequent  resumption  of 
differentials. 

Last,  the  substitution  of  a  percentage  scale  of  differentials  in  place 


59 

of  the  fixed  and  rigid  specific  differential  of  so  much  per  hundred  weight. 

I  have  also  endeavored  to  give  you  a  record  of  the  differentials  in 
use  by  various  other  routes  and  lines,  ocean-and-rail,  lake-and-rail, 
Trans-Pacific,  between  points  in  the  United  States,  between  points  in 
Canada,  and  from  Japan  and  China  to  points  in  the  United  States  and 
Canada,  the  intention  being  to  show  the  wide  extent  and  universality 
of  the  rule.  I  touched  on  the  point  yesterday  that  the  guarantee  of  a 
fixed  sum  per  month  or  per  year,  or  for  any  period,  to  the  Panama 
route,  is  in  reality  a  differential  under  a  more  agreeable  name.  And  I 
call  your  attention  to  remarks  made  at  the  Denver  meeting,  that  after 
all,  the  Canadian  Pacific  differentials  did  not  amount  to  so  very  much 
if  they  could  only  get  the  Panama  route  fixed.  I  called  your  attention 
to  the  disabilities  of  the  Canadian  Pacific  under  which  they  labored  on 
account  of  the  infrequent  sailings  of  the  Pacific  Coast  Steamship  Com- 
pany between  Vancouver  and  San  Francisco.  It  is  a  great  disadvantage 
as  to  time  and  risk  compared  with  the  Sunset  Route  and  the  all-rail  lines. 
We  are  not  claiming  that  the  risk  of  the  Canadian  Pacific  water  line  is 
any  greater  than  the  risk  of  the  Sunset  Line,  but  the  risk  is  greater  as 
against  the  all-rail  lines  and  the  time  is  much  greater  as  compared  with 
the  Sunset  and  with  the  all-rail  lines. 

Next,  I  have  shown  you  that  during  the  year  1891,  when  we  changed 
from  the  differential  to  the  subsidy,  our  differentials  simply  took  on 
another  phase  and  in  accordance  with  our  agreement  in  that  connection 
we  put  our  rates  even  with  the  rates  of  the  other  lines — the  all-rail  lines, 
We  got  no  business.  It  may  be  said,  and  was  said  yesterday,  that 
naturally  under  those  conditions  we  did  not  work  for  the  business.  That 
is  true.  Our  agents  did  not  specially  work,  but  the  agencies  were  all 
open;  our  men  were  still  on  the  street;  our  men  were  gathering  up 
business  for  other  directions  and  if  a  carload  for  California  fell  in  their 
way — if  they  could  get  it  at  even  rates,  they  gathered  it  in  just  as  cheer- 
fully as  they  would  a  carload  of  any  other  freight  for  any  other  point. 
But  with  the  even  rates  nothing  was  ever  offered  to  us  other  than  what 
I  have  shown  you,  which  does  not  amount  to  very  much, — practically 
nothing.  I  do  not  know,  gentlemen,  that  I  can  add  very  much  more  to 
the  statements  I  have  already  made.  I  have  taken  up  a  very  large 
amount  of  your  time,  and  I  fear  may  have  exhausted  in  a  measure  your 
patience,  but  as  we  regard  this  matter  as  one  of  the  utmost  importance 
we  felt  it  was  necessary  that  we  should  endeavor  to  cover  every  possible 
point  that  we  could  think  of,  in  order  that  the  fullest  statement  of  the 
case  should  be  before  you.  I  do  not  know  that  I  have  anything  more 
to  say  other  than  to  thank  you  for  the  patient  and  kind  hearing  you  have 
given  me. 

ARBITRATOR  DAY— I  would  like  to  ask  you  a  question,  Mr.  Kerr. 
You  touched  on  it  in  your  summing  up,  but  you  did  not  go  into  it  as  fully 


6o 

as  I  would  like  to  have  had  you.  You  were  speaking  about  the  volume 
of  traffic  that  came  to  you  during'  the  period  of  time  that  you  enjoyed 
the  subsidy  from  the  American  lines,  and  you  stated  that  at  that  time 
you  maintained  equal  rates  with  the  American  lines. 

MR.  KERR— Yes  sir. 

ARBITRATOR  DAY— And  the  total  amount  of  traffic  that  you  car- 
ried during  the  year  was  about  $30,000.00  in  revenue,  or  a  little  less. 

MR.  KERR— $28,000.00  odd. 

ARBITRATOR  DAY— What  was  the  total  amount  of  revenues  that 
your  line  enjoyed  from  purely  United  States  traffic  between  points  east 
of  the  Missouri  River  and  California,  in  the  year  1897? 

MR.  KERR — That  is  a  question  that  I  cannot  answer  offhand,  sir. 
but  I  will  endeavor  to  get  the  information  for  you. 

ARBITRATOR  DAY— Can  you  tell  me  the  total  amount  of  inter- 
state traffic,  I  mean  either  in  tonnage  or  revenue,  of  the  Canadian  Pacific 
road,  that  you  received  during  the  year  1897?  The  total  amount  of 
inter-state  traffic,  purely  United  States  traffic? 

MR.  KERR — Not  at  this  present  moment,  but  I  \vill  give  you  the 
information. 

ARBITRATOR  DAY— Can  you  tell  us  whether  the  bulk  of  United 
States  traffic  that  your  line  transports — I  mean  inter-state,  not  imported 
or  exported  by  either  of  your  two  great  ports,  but  inter-state  traffic  be- 
tween the  States — whether  the  bulk  of  it  is  between  California  points  and 
points  east  of  the  Missouri  River,  or  \vhether  the  bulk  of  it  is  between 
points  east  of  the  Missouri  River? 

MR.  KERR — Do  I  understand  you  to  ask  whether  the  bulk  of  it  is, 
say  from  Chicago  territory  and  westward-middle  states,  middle-west 
states,  as  against  the  Atlantic  seaboard? 

ARBITRATOR  DAY— What  I  was  endeavoring  to  get  at  was  where 
you  get  the  bulk  of  your  purely  inter-state  traffic. 

MR.  KERR — We  get  the  bulk  of  our  inter-state  traffic,  generally,  in 
the  middle  states,  that  is,  say  from  Pittsburgh  west;  Pittsburgh,  Chicago 
and  Missouri  River. 

ARBITRATOR  DAY— And  where  do  you  deliver  it  to,  the  bulk  of  it, 
east  or  west  of  the  Missouri  River? 

MR.  KERR — Oh,  we  deliver  it  out  on  the  Coast. 

ARBITRATOR  DAY— The  bulk  of  your  traffic  is  California  traffic, 
is  that  right? 

MR.  KERR — Oh  no;  not  the  bulk.  Are  you  treating  now  of  our 
whole  business,  both  east  and  west,  or  business  merely  on  our  eastern 
lines? 

ARBITRATOR  DAY— I  asked  you  the  questions  separately,  in 
order  to  separate  it,  but  you  w^ere  unable  to  answer  the  first  question  off- 


6i 

hand;  and  then  I  asked  you  whether  the  bulk  of  your  traffic  was  Cal- 
ifornia traffic,  the  bulk  of  your  inter-state  traffic. 

MR.  KERR — Oh  no;  not  to  the  westward. 

ARBITRATOR  DAY — What  percentage  of  your  inter-state  traffic  is 
California  traffic? 

MR.  KERR— That  I  cannot  say,  offhand. 

ARBITRATOR  DAY— What  is  your  impression? 

MR.  KERR — As  compared  to  what  we  carry  to  Puget  Sound? 

ARBITRATOR  DAY— Yes;  your  entire  United  States  traffic;  what 
percentage  of  it  is  California? 

MR.  KERR — I  would  not  like  to  give  you  an  offhand  answer.  I 
would  rather  give  you  a  correct  answer,  and  if  you  will  give  me  a  memo- 
randum of  those  questions,  I  will  give  it  to  you  before  the  session  is  over. 

ARBITRATOR  DAY— I  haven't  them  written  out;  they  just  oc- 
curred to  me. 

MR.  KERR — Well,  the  notes  are  here  and  as  I  shall  have  those,  I  will 
see  that  you  are  answered. 

ARBITRATOR  DAY — I  want  to  see  if  I  understand  your  contention 
respecting  the  differential.  Is  it  a  part  of  your  claim  that  you — I  mean 
the  Canadian  Pacific  line — that  you  should  make  the  Trans-Continental 
rates  for  the  American  lines? 

MR.  KERR— No;    never. 

ARBITRATOR  DAY— That  is  not  your  contention? 

MR.  KERR— No  sir. 

ARBITRATOR  DAY— Who  should  make  them? 

MR.  KERR — The  American  lines  should  make  the  rates. 

ARBITRATOR  DAY — Then  what  is  your  precise  contention? 

MR.  KERR — Then  our  contention  is  that  we  go  in  on  those  rates  on 
the  basis  of  our  differential,  whatever  that  may  be. 

ARBITRATOR  DAY— They  make  the  rates  and  then  you  insist  that 
you  shall  have  a  differential  below  those  rates? 

MR.  KERR — I  do  not  know  that  we  insist.  * 

ARBITRATOR  DAY — By  "insist"  I  mean  that  is  your  contention. 
I  am  not  endeavoring  to  use  any  word  that  is  at  all  offensive.  By  "in- 
sist," I  mean  that  is  your  position? 

MR.  KERR— Yes  sir. 

ARBITRATOR  DAY— That  the  American  lines  shall  keep  a  certain 
percentage  above  you,  or  you  a  certain  percentage  below  them? 

MR.  KERR — No;  the  principle  is,  that  the  American  lines  shall  make 
the  rates.  They  do  so.  We  sit  in  council  with  them;  we  have  done  so 
ever  since  we  have  been  outside  of  the  Association.  Every  time  a  meet- 
ing is  called,  or  nearly  every  time,  we  receive  an  invitation  to  attend; 
we  always  do  so.  They  make  the  rates  and  we  assent  to  them.  We  never 
object.  Then  we  take  our  differentials,  just  as  any  other  differential  line 


62 

does,  out  of  New  York,  where  there  are  agreed  differential  rates  as 
between  all-rail  and  lake-and-rail  lines.  The  all-rail  lines  make  the  rates 
and  then  there  are  these  fixed  differentials  that  the  lake-and-rail  lines 
charge  below  that,  in  precisely  the  same  manner  that  we  do. 

ARBITRATOR  DAY— If  I  understand  you  then,  your  contention  is 
that  you  shall  have  a  differential  and  the  American  lines  fix  the  rate? 

MR.  KERR— Yes  sir. 

ARBITRATOR  DAY— They  fix  it  at  what  they  regard  reasonable: 
high  or  low? 

MR.  KERR— Yes  sir;  that  is  it. 

ARBITRATOR  DAY— Now,  I  will  ask  you  another  question,  if  you 
please:  is  it  a  part  of  your  case  that  you  shall  be  allowed  a  differential 
Under  the  rate  on  California  traffic  that  is  to  be  charged,  by  say,  the 
Texas  &  Pacific? 

MR.  KERR — Yes  sir,  I  should  think  so.  What  are  the  disabilities  of 
the  Texas  &  Pacific?  If  they  are  equal  to  ours,  no. 

ARBITRATOR  DAY— But  your  contention  is,  as  against  the  Texas 
&  Pacific  you  are  entitled  to  a  differential  on  Atlantic  Seaboard  California 
traffic? 

MR.  KERR — No,  our  contention  is  that  whatever  the  agreed  rates  of 
the  Trans-Continental  lines  may  be,  that  we  shall  be  permitted  to  charge 
a  differential  rate  below  those  rates. 

ARBITRATOR  DAY— Do  you  regard  that  your  line  is  at  a  disad- 
vantage in  respect  to  California  traffic  in  its  competition  with  the  Texas  & 
Pacific? 

MR.  KERR — I  do  not  know  that  the  Texas  &  Pacific  ever  enters  into 
our  calculations  at  all. 

ARBITRATOR  DAY— Do  you  regard  that  you  are  entitled  to 
charge  a  lower  rate  on  California  traffic  than  is  charged  by  the  Northern 
Pacific  on  California  traffic? 

MR.  KERR — No;  if  they  use  the  water  lines.  We  are  on  record,  over 
and  over  again,  that  in  the  case  of  the  Northern  Pacific  and  Great  North- 
ern, that  wherever  they  use  the  steamer  line  from  Puget  Sound  to  San 
Francisco,  they  shall  have  the  differential,  if  they  want  it.  But  they  are 
out  of  San  Francisco  business;  they  do  not  claim  to  be  San  Francisco 
lines;  they  do  not  work  for  San  Francisco  business.  In  other  words, 
they  have  made  a  trade.  They  have  differential  rates  over  lake-and-rail 
lines  up  into  Puget  Sound,  Portland,  and  points  north  of  Portland,  and 
they  have  agreed  not  to  go  into  California. 

ARBITRATOR  DAY— Do  you  also  have  those  rates? 

MR.  KERR — If  we  use  lake-and-rail,  yes  sir.  You  understand  we 
cannot  use  Canadian  ships  and  our  line — the  Canadian  Pacific  line, 
steamer  line  from  Owen  Sound  to  Fort  William,  are  Canadian  registered 
British  bottoms.  They  cannot  carry  inter-state  freight. 


63 

ARBITRATOR  DAY — And  the  converse  of  that  is  true;  American 
ships  cannot  carry  Canadian  traffic? 

MR.  KERR — The  converse  of  that  is  true;  yes  sir,  except  out  on  the 
British  Columbia  Coast,  where  there  is  an  exception  made  and  American 
ships  are  permitted  to  carry  Canadian  traffic.  For  instance,  the  North- 
ern Pacific  steamer,  "City  of  Kingston,"  an  American  registered,  Ameri- 
can ownership,  is  permitted  to  carry  Canadian  goods  from  Seattle  or 
Tacoma  to  Victoria.  They  take  those  goods  out  of  Montreal;  Toronto, 
London,  in  Ontario  and  Quebec,  and  carry  them  into  Tacoma  or  Seattle 
and  transfer  them  to  American  ships  and  they  are  landed  in  Victoria. 
The  exception  is  made  there,  too. 

ARBITRATOR  DAY— That  is  an  exception? 

MR.  KERR— Yes  sir. 

ARBITRATOR  DAY— That  is  made  by  the  governing  council,  I 
suppose? 

MR.  KERR— Something  of  that  kind. 

ARBITRATOR  DAY— As  a  part  of  your  case  you  have  charged  the 
American  lines  with  violating  the  law  and  you  referred  to  an  affidavit,  and 
you  subsequently  stated  that  the  affidavit  was  this  statement  or  this  letter 
of  this  party.  Was  there  anything  else  that  would  respond  to  an  affidavit, 
anything  more  than  was  contained  in  that  brief  letter? 

MR.  KERR — You  will  remember,  of  course,  that  I  explained  to  you 
exactly  how  the  word  affidavit  came  to  be  used. 

ARBITRATOR  DAY— Yes,  you  did. 

MR.  KERR — I  did  not  use  that  knowingly  or  willingly. 

ARBITRATOR  DAY — I  do  not  mean  to  make  any  play  on  that. 

MR.  KERR — It  simply  fell  in  the  way  explained. 

ARBITRATOR  DAY— We  all  understood  it  that  way,  that  you  re- 
lied on  an  affidavit,  of  making  charges  that  the  American  line  had  vio- 
lated the  law. 

MR.  KERR— That  was  the  letter  that  Mr.  Shaughnessy  wrote. 

ARBITRATOR  DAY— Mr.  Shaughnessy  makes  use  of  the  state- 
ment in  this  letter  that  the  American  lines,  or  some  of  them,  are  violating 
the  law — have  violated  the  law  in  the  way  of  cuttinp-  rates.  Do  you  want 
to  be  understood  as  making  that  charge  against  all  the  American  lines 
that  do  business  out  of  San  Francisco? 

MR.  KERR — No  sir;  I  am  making  no  charges  at  all. 

ARBITRATOR  DAY — Then  will  you  specify  why  you  introduced 
that?  What  is  the  purpose  of  the  allegation? 

MR.  KERR — Simply  as  part  and  parcel  of  the  record  of  this  case. 
The  point  is  this;  these  gentlemen  of  San  Francisco  make  certain  state- 
ments ; — they  make  a  statement  that  the  American  lines  are  maintaining 
agreed  rates  and  that  were  it  not  for  the  Canadian  Pacific  differentials 
*he  market  in  San  Francisco  would  be  steady  and  stable  and  thev  would 


64 

know  what  they  were  about ;  could  put  proper  prices  on  their  goods  and 
be  sure  that  their  next  door  neighbor  would  not  undersell  them  to- 
morrow by  reason  of  getting  lower  rates,  and  that  the  Canadian  Pacific 
differentials  were  rate  disturbers.  That  is  the  reason  why  we  put  that 
full  record  in;  to  disprove,  and  along  with  it  we  filed  the  letters  that  we 
received  on  the  other  side  from  merchants  of  equal  standing  .with  the 
gentlemen  who  signed  the  petition.  It  is  all  put  in  there  intended  to  go 
together.  We  are  making  no  charges;  we  are  simply  putting  in  such 
points  as  we  think  may  be  in  support  of  our  case. 

ARBITRATOR  DAY— The  time  that  you  devoted  to  that  subject 
yesterday  afternoon,  without  any  doubt,  impresses  upon  my  mind — and  I 
think  it  must  have  done  so  upon  the  minds  of  the  other  Arbitrators,  al- 
though I  do  not  attempt  to  speak  for  them — but  it  did  upon  my  mind,  that 
you  made  that  a  part  of  your  case;  charges  of  violation  of  the  lawT,  that  is 
to  say  that  the  American  lines  were  soliciting  and  carrying  traffic  below 
their  published  tariffs.  At  that  time  I  could  not  quite  see  that  the  allega- 
tion that  the  American  lines  were  violating  the  law  was  germane  to  the 
matter  we  have  to  inquire  into;  but  on  subsequent  reflection  it  came  to 
my  mind  that  there  was  an  aspect  in  which  it  might  be  germane,  and  I 
want  to  get  at  precisely  what  you  meant.  And,  I  also  felt  that  if  there 
were  any  of  these  gentlemen  who  were  not  violating  the  law  you  should 
exculpate  them,  or  in  other  words  name  the  roads  that  are  violating  the 
law.  That  is  all  that  I  care  to  say. 

ARBITRATOR  WASHBURN— Does  the  Canadian  Pacific  Ry.  de- 
sire to  be  heard  further  at  this  time?  If  not,  we  will  then  call  upon  the 
American  lines  to  present  their  side  of  the  matter. 

MR.  STUBBS — Mr. Chairman,  it  is  now  twenty  minutes  to  12  o'clock; 
undoubtedly  the  Board  will  want  to  adjourn  at  half-past  12  or  i  o'clock 
for  luncheon,  and  while  I  am  ready  to  proceed,  I  dislike  to,  because  I 
will  certainly  not  get  under  way  before  you  will  want  to  adjourn,  and 
unless  the  Board  has  a  decided  preference  or  objection  to  adjourning 
until  2  o'clock  so  that  I  can  begin  and  have  some  hours  without  inter- 
ruption, I  would  prefer  not  to  begin  now,  but  I  would  like  to  have  it 
understood  that  I  am  entirely  in  the  hands  of  the  Board  in  that  respect 
and  will  begin  if  you  like. 

ARBITRATOR  MIDGLEY— Well,  we  will  consult  your  wishes,  Mr. 
Stubbs. 

ARBITRATOR  WASHBURN— We  will  adjourn  then  until  2 
Vclock  this  afternoon. 


Afternoon  Session,  October  i3th,  1898,  2  P.  M. 
The  meeting  convened  pursuant  to  adjournment. 

ARBITRATOR  WASHBURN— Mr.  Stubbs,  are  you  ready  to  pro- 
ceed now? 

MR.  STUBBS— Mr.  Chairman  and  Gentlemen  of  the  Board:  While 
I  have  been  selected  by  the  Committee  appointed  at  the  Denver  meeting 
to  represent  the  American  lines  in  the  presentation  of  their  case  and  while 
all  of  the  members  are  not  present  I  think  it  fitting  that  I  should  state 
that  they  all  have  contributed  in  the  preparation  of  our  case.  All  desired 
very  much  to  be  here,  but  having  done  their  part,  they  have  thought  that 
they  might  well  leave  the  presentation  of  the  case  in  the  hands  of  myself 
and  the  members  of  the  Committee  that  were  resident  in  Chicago,  or  at 
least  that  they  were  so  safe  in  it  that  they  would  not  be  justified  in  ignor- 
ing other  important  and  pressing  engagements  that  detained  them. 

Necessarily,  the  statements  and  arguments  which  we  will  submit 
have  been  largely  prepared  in  advance  in  anticipation  of  the  case  that 
would  be  made  by  our  adversary.  I  am  not,  nor  is  any  member  of  our 
Committee  accustomed  to  this  sort  of  work.  This  is  the  first  time  in  my 
life  that  I  have  appeared  before  a  Board  of  Arbitration  or  a  Commission 
to  represent  our  own  interests  or  the  interests  of  other  lines,  unaided  by 
counsel.  It  was  very  early  agreed  between  the  Canadian  Pacific  and 
ourselves  that  it  would  be  better  all  around  if  we  as  traffic  men,  having 
to  deal  with  this  question  in  the  future,  having  always  handled  it,  know- 
ing each  other,  should  undertake  to  make  the  case  before  this  Board. 
Naturally  then,  our  case  has  been  prepared  without  much  reference  to 
the  order  that  would  be  pursued  by  the  other  side.  It  is  customary  in 
proceedings  of  this  character  for  the  negative  before  opening  its  case  to 
briefly  review  the  points  made  by  the  affirmative  in  its  opening,  but  owing 
to  my  not  being  accustomed  to  this  procedure  and  believing  that  we 
have  pretty  fairly  covered  all  their  points,  I  have  decided  that  it  would 
be  better  to  go  forward  with  the  case  as  it  has  been  written  out  and  take 
up  such  points  as  have  been  made  or  presented  by  the  Canadian  line 
in  the  order,  not  as  they  were  presented,  but  as  they  will  fit  in  with  the 
arrangement  of  our  case,  so  that  while  I  may  take  things  up  out  of  their 
order  as  prescribed  by  their  case,  I  think  before  the  statement  or  present- 
ation is  finished  we  will  touch  upon  every  point.  Our  statement  was 
also  prepared  and  well  under  way  before  we  knew  what  the  constitution 
of  this  Board  would  be  so  that  if  there  is  anything  in  the  opening  which 


66 

would  seem  to  discredit  the  knowledge  and  intelligence  of  the  railroad 
experts  who  constitute  this  Board,  you  will  understand  why  it  appears  so. 
I  will  not  attempt  to  omit  it  or  wrest  it  from  its  logical  connection;  if  I 
did  I  might  become  confused,  so  I  shall  go  ahead  in  the  order  that  the 
case  has  been  prepared. 


This  contention  is  between  the  Canadian  Pacific  Railway  Company, 
on  the  one  hand,  and  on  the  other  hand,  what  are  known  as  the  American 
Trans-Continental  lines,  being  the  transportation  lines  owned  or  oper- 
ated by  the  following  named  companies: 

The  Atchison,  Topeka  &  Santa  Fe  Ry.  Co. 

The  Burlington  &  Missouri  River  R.  R.  Co.  in  Neb. 

The  Chicago,  Rock  Island  &  Pacific  Ry.  Co. 

The  Colorado  Midland  Railway  Co. 

The  Denver  &  Rio  Grande  R.  R.  Co. 

The  Missouri,  Kansas  &  Texas  Ry.  Co. 

The  Missouri  Pacific  Ry.  Co. 

The  Northern  Pacific  Ry.  Co. 

The  Oregon  Railroad  &  Navigation  Co. 

The  Oregon  Short  Line  Railroad. 

The  Rio  Grande  Western  Ry.  Co. 

The  St.  Louis  &  San  Francisco  Railroad  Co. 

The  Southern  Pacific  Company. 

The  Texas  &  Pacific  Railway  Co. 

The  Union  Pacific  Railroad  Company. 

The  Canadian  Pacific  Railway  Company  will  hereafter  be  referred  to 
as  the  Canadian  .line;  the  other  parties  as  the  American  lines. 

The  lines  of  all  these  parties  are  delineated  on  this  map  (''Exhibit  Z") 
in  red.  The  lines  of  their  several  connections,  for  the  purpose  of  illus- 
tration, are  delineated  on  this  map  in  blue.  These  connections  (the 
blue  lines),  while  used  to  make  through  routes  and  through  rates  between 
San  Francisco  and  their  own  points,  are  not  parties  to  the  dispute,  being 
supposed  not  to  be  interested.  The  fact  of  their  non-interest  is  largely 
a  supposition,  because  it  must  be  that,  since  the  claim  is  for  a  differential 
under  the  rates  of  American  lines — under  their  through  rates,  and  as  the 
through  rates  embrace  the  charge  for  the  transportation  service  of  these 
connecting  lines,  necessarily,  they  are  interested.  That  is  to  say,  that  if 
a  differential  operates  so  as  to  turn  traffic  from  any  of  these  (blue)  lines 
to  this  line  (indicating  on  the  map  the  Canadian  Pacific  Ry.),  of 
course  it  turns  it  from  these  direct  lines;  but,  from  the  beginning,  it 
has  been  the  custom  for  all  the  connections  of  what  we  call  the  Trans- 


67 

Continental  lines  to  leave  largely,  at  the  outset  altogether,  and  even 
today,  they  leave  largely  to  these  lines,  the  question  of  determining 
what  the  through  rates  shall  be.  Heretofore,  in  all  discussions  and 
arrangements,  contracts  for  the  purpose  of  maintaining  revenue  have 
been  entered  into  by  these  lines  without  much  reference  to  their  connec- 
tions. At  times  their  connections  have  been  consulted  and  they  have 
ratified  or  objected,  as  the  case  may  be,  but  it  has  been  common  enough 
to  justify  me  in  saying  that  as  a  rule  they  are  supposed  not  to  be 
interested. 

The  contention  is  in  respect  to  freight  rates  and  freight  rates  only. 
That  is  to  say,  between,  in  either  direction,  San  Francisco  on  the  one 
hand,  and  on  the  other  hand  places  in  the  United  States  and  Canada  east 
of  an  imaginary  line,  which  is  also  shown  on  the  map  here  in  red,  but 
in  order  to  make  it  more  marked  we  have  it  in  different  colors  (indicating 
on  map).  This  line  forms  the  eastern  boundary  of  the  Trans-Continental 
Association.  It  will  hereafter  be  referred  to  as  the  Missouri  River  line, 
as  that  is  the  common  phrase  with  us  in  referring  to  it.  It  means  that 
any  business  to  or  from  San  Francisco  which  passes  this  line — crosses  it, 
en  route,  is  subject  to  the  Trans-Continental  Association,  or  was  when 
it  was  alive,  and  is  now  subject  to  this  controversy,  no  matter  whether 
it  originates  in  Florida  or  in  Maine  or  in  the  province  of  Quebec,  or 
whether  it  originates  on  this  line — whether  it  originates  on  it  or  goes 
across  it  from  any  of  these  points, — to  or  from  San  Francisco — it  is  the 
subject  of  this  controversy.  I  think  it  unnecessary  for  me  to  describe 
this  line  any  further  than  it  is  delineated  on  the  map,  although  I  have 
described  it,  or  written  it  out  in  my  manuscript  as  it  appears  in  the  pro- 
ceedings of  the  Trans-Continental  Association,  and  I  will  give  it  as 
written  to  the  reporters  so  that  the  record  may  be  straight. 

At  a  meeting  of  the  chief  traffic  officers  of  the  American  lines  and 
the  Canadian  line  at  Denver,  Colo.,  on  the  22nd  of  August,  1898,  the 
following  resolution  was  unanimously  adopted.  (I  omit  the  proviso.) 

"Resolved,  that  the  lines  here  represented  will  submit  to  arbi- 
tration, the  question  of  whether  the  Canadian  Pacific  Railway  is, 
or  should  be  entitled  to  a  differential  under  the  rates  made  by  the 
United  States  lines  for  the  carriage  of  the  freight  in  question," — 
just  stated  as  freight  to  or  from  San  Francisco  and  these  points — • 
(pointing  to  map)  "and  if  any  differentials,  what  these  differentials 
shall  be.  The  Board  of  Arbitration  to  consist  of  three  members; 
one  to  be  selected  by  the  Canadian  Pacific  Railway,  one  to  be 
selected  by  the  American  lines  interested,  they  two  to  select  a 
third  and  that  the  decision  of  two  members  of  said  Board  of  Arbi- 
tration shall  be  final,  conclusive  and  binding  upon  all." 


68 

It  is  in  pursuance  of  this  resolution  that  we  are  here.  It  presents 
two  questions  for  determination  by  the  Board. 

First:  Whether  the  Canadian  line  is  or  should  be  entitled  to  a  differ- 
ential under  the  rates  made  by  the  American  lines  for  the  carriage  of 
freight  interchanged  by  San  Francisco  with  places  on  or  east  of  the 
Missouri  River  line. 

Second:  If  it  is  so  entitled,  what  shall  these  differentials  be, — that  is 
to  say,  in  what  territory  shall  its  differential  rates  obtain  against  the 
American  lines  and  in  what  sum  shall  consist  the  difference  or  differences 
in  its  rates  compared  to  those  of  the  American  lines. 

If  the  first  question  is  decided  in  the  negative,  that  decision  will  also 
dispose  of  the  second  question. 

In  railroad  parlance,  when  two  or  more  carriers  agree  that  a  pre- 
scribed difference  shall  subsist  between  their  respective  rates,  that  differ- 
ence is  called  a  "differential  rate".  When  however  this  difference  is  made 
without  agreement  it  is  called  a  "cut",  and  the  lower  rate  is  termed  a 
"cut  rate."  This  must  not  be  confused  with  so-called  differences  in  rates, 
for  example  the  rates  from  the  Atlantic  Seaboard  around  Cape  Horn  to 
San  Francisco  are  lower  than  the  rates  across  the  continent  or  via  the 
Isthmus.  That  is  not  called  by  railroad  men,  a  differential  rate.  The  rates 
via  the  Isthmus  of  Panama  are  likewise  lower  than  rates  by  rail.  These 
differences  originate  in  the  main  from  the  difference  in  the  cost  of  car- 
riage and  are  accepted  as  natural.  There  can  be  no  "differential"  in  the 
sense  that  term  is  used  by  practical  railroad  men  except  by  agreement, 
between  on  the  one  hand,  the  carrier  or  carriers  whose  rates  are  the 
standard,  or  assumed  to  be  the  standard,  and  on  the  other  hand,  the 
carriers  whose  rates  are  lower  than  the  standard.  The  term  "differential 
rate"  always  implies  an  agreement  between  the  lines  whose  rates  are 
contrasted  by  the  use  of  that  term.  One  line  may  adopt  a  lower  scale 
of  rates  than  that  which  is  in  use  by  another  line  for  its  service  between 
the  same  points  and  the  line  carrying  the  higher  rates  may  for  reasons 
sufficient  to  itself  ignore  the  fact  that  the  other  line  is  carrying  lower 
rates,  yet  in  such  a  case  the  term  "differential"  would  not  be  applied  by 
practical  railroad  men  to  the  difference  between  the  two  sets  of  rates. 

There  are  several  kinds  of  differential  rates.  I  have  thought  it  neces- 
sary to  explain  this  in  brief,  because  the  term  is  so  common  that  the  idea 
is  abroad  that  it  is  part  and  parcel  of  the  well  settled,  well  considered 
policy  of  railroad  lines.  Differential  rates  may  be  of  different  kinds,  orig- 
inating in  various  conditions  and  having  different  objects  in  view.  For 
example,  where  several  distributing  centers  of  trade  seek  a  common 
market  of  supply  or  consumption,  the  carriers,  by  agreement,  sometimes 
fix  different  rates  or  establish  a  rule  of  difference  to  be  observed  in  th^ 
rates  to  and  from  these  different  trade  centers,  respectively.  An  example 
of  this  kind  of  a  differential  is  found  in  the  rates  from  Chicago  to  Boston, 


Xew  York,  Philadelphia  and  Baltimore,  respectively.  The  rates  for  New 
York  being  taken  as  the  base,  Baltimore  and  Philadelphia  are  made 
lower  by  an  agreed  difference  and  Boston  is  made  higher  by  an  agreed 
difference.  Again,  the  rates  from  New  York  to  Chicago,  Cincinnati,  St. 
Louis,  and  so  forth,  do,  by  agreement,  bear  a  fixed  relation  to  each 
other,  the  Chicago  rate  being  the  base,  the  respective  rates  to  the  other 
points  being  an  agreed  difference,  lower  or  higher,  as  the  case  may  be. 
As  a  rule,  however,  these  differences  in  rates  are  governed  in  a  greater 
or  less  degree  by  the  difference  in  the  cost  of  the  respective  service,  as 
indicated  by  the  length  of  haul; 

There  is  another  kind  of  differential,  designed  to  put  competing 
supply  markets  upon  an  equality,  so  far  as  it  is  possible,  with  respect  to 
a  common  consuming  market,  having  the  same  object  in  view  as  those 
just  described,  but  differing  in  this  respect,  that  the  difference  in  the  rate 
is  purely  arbitrary,  has  no  demonstrable  relation  to  the  relative  cost  or 
length  of  haul  of  the  respective  parties  who  agree  upon  the  differential, 
though  when  the  entire  hauls,  that  of  the  associated  parties  and  that  of 
their  respective  connections  are  combined,  the  factor  of  cost  is  traceable. 
An  example  of  this  kind  of  differential  is  found  in  Texas.  Galveston  is 
the  base  point  and  the  rates  from  all  Mississippi  River  crossings  into 
Texas  bear  a  certain  agreed  relation  to  Galveston  rates  to  what  are  called 
Texas  common  points.  The  numerous  cities  competing  for  that  trade,  New 
Orleans,  St.  Louis,  Kansas  City,  Louisville,  Cincinnati,  Chicago,  and  so 
forth,  necessitate  this  differential  adjustment.  It  is  competition  of  differ- 
ent markets  and  not  competition  of  carriers  which  is  the  strongest  force 
in  creating  the  rate  adjustment.  To  explain  my  reference  to  cost,  this 
differential  is  agreed  to  by  the  Texas  lines  without  consultation  with  and 
without  any  regard  to  their  connections.  For  example,  the  differential 
as  between  New  Orleans,  Galveston  and  St.  Louis  is  regulated,  and  rates 
for  traffic  from  all  these  outside  points  (pointing  to  map)  is  agreed  to  by 
these  Texas  lines  alone  without  consulting  their  connections.  Measuring 
the  differentials  by  the  length  of  haul  of  the  lines  alone  who  agree  to  it, 
you  cannot  trace  the  factor  of  cost  in  their  arrangement,  but  when  you 
measure  the  total  haul,  the  total  cost,  by  taking  into  consideration  the 
connections,  why,  there  is  that  element  to  be  traced. 

Another  class  of  differentials  exists  called  "Insurance  differentials". 
These  exist  in  places  where  the  competition  is  in  whole  or  in  part  between 
a  carrier  by  water  and  a  carrier  by  rail.  An  example  of  this  is  found 
in  Texas  where  the  rates  from  New  York  via  water  by  way  of  Galveston 
or  New  Orleans  are  lower  than  the  ordinary  all-rail  rates.  The  difference 
in  such  cases  is  in  a  measure  arbitrary.  The  aim,  however,  is  to  approxi- 
mate the  difference  in  rate  to  the  cost  of  insuring,  which  cannot  be  done 
accurately,  having  some  regard  to  the  difference  in  the  cost  of  transport- 
ation by  water  as  compared  with  the  cost  by  rail. 


yo 

Another  example  is  found  on  the  Pacific  Coast  between  San  Francisco 
and  Portland,  and  between  San  Francisco  and  Los  Angeles,  Santa  Bar- 
bara and  San  Diego  where  the  service  can  be  done  entirely  by  rail  or 
entirely  by  sea.  In  this  class  of  cases  it  is  not  unusual  for  the  differ- 
ential to  be  in  favor  of  the  stronger  line, — stronger  in  the  sense  that  it 
carries  the  bulk  of  tonnage, — that  is  to  say,  that  notwithstanding  that 
the  steamship  lines  between  New  York  and  Texas  are  favored  by  the 
differential,  they  carry  the  bulk  of  the  traffic.  The  rail  lines  do  not 
demand  and  do  not  get  a  differential  in  order  that  they  may  have  a  fair 
share,  a  reasonable  share  of  the  traffic.  Likewise,  on  the  Pacific  Coast 
between  San  Francisco  and  Portland,  at  Los  Angeles  and  San  Diego, 
respectively,  notwithstanding  that  the  steamship  lines  are  favored  by 
agreed  differential  rates,  they  carry  the  bulk  of  the  traffic.  The  weak 
lines  in  point  of  taking  power  carry  the  higher  rates.  It  is  worthy  of  note 
that  these  two  examples  (and  doubtless  other  similar  examples  may  be 
found),  quite  upset  the  common  notions  that  water  lines  always  work  at 
a  disadvantage  against  the  competing  rail  lines;  that  they  always  require 
an  artificial  advantage  in  rates  in  order  to  successfully  compete  with 
rival  rail  lines,  and  before  we  close  it  will  be  shown  conclusively  that  such 
exceptions  also  obtain  as  between  mixed  rail-and-water  lines  versus  all- 
rail  lines.  It  might  be  well  to  notice  also  that  when  the  water  line  is  the 
stronger,  carries  the  bulk  of  the  tonnage,  it  never  concedes  to  the  all-rail 
competitor  any  differential  in  recognition  of  said  all-rail  carrier's  title  or 
right  to  a  share  of  the  business,  and  the  same  is  true  as  between  the 
mixed  rail-and-water  line  as  against  the  all-rail  line.  Another  example 
of  this  kind  of  differential  is  found  in  the  lake-and-rail  rates  to  Chicago 
from  Seaboard  cities.  In  the  latter  case,  however,  the  principal  railroad 
lines,  by  which  I  mean  the  Trunk  Lines,  own  and  operate  in  connection 
with  their  rail  lines,  the  steamships  which  ply  the  lakes,  and  as  the  cost 
of  transportation  by  water  is  less  per  unit  of  service  as  a  rule,  the  differ- 
ence in  the  cost  of  the  service  has  something  to  do  with  creating  the 
difference  in  rate  and  very  much  facilitates  an  agreement  between  the  rival 
all-rail  lines  and  the  mixed  rail-and-water  lines  as  to  what  the  differ- 
entials shall  be.  But  another  very  weighty  factor  in  this  case  is  the  fact 
that  the  lake-and-rail  route  is  only  a  summer  route.  In  winter  it  is 
frozen — no  thoroughfare.  In  reference  to  my  statement  that  these  lake- 
and-rail  lines,  the  steamship  part  of  them,  are  owned  by  the  Trunk  Lines, 
I  think  I  find  in  the  Canadian  line's  argument  of  this  morning  acknowl- 
edgment of  that  fact.  The  representative  of  the  Canadian  line  says: — 
"In  connection  with  the  point  I  endeavored  to  make  yesterday  of  the 
frequent  sailings  of  lake  steamers  from  Buffalo  and  Lake  Erie  ports, 
steamers  operating  in  connection  with  railroad  companies,  many  of  them 
—I  think  most  of  them — owned  by  railroad  companies,  forming  what  is 
known  as  the  lake-and-rail  lines." 


Under  this  head,  in  the  Texas  case,  it  should  be  explained  that  the 
differential  originated  at  a  time  when  a  majority  of  the  lines  entering  the 
state  of  Texas  from  the  North,  either  extended  to  Galveston  or  were 
controlled  by  ownership  or  leased  lines  that  ran  from  Galveston  into 
Texas,  so  that,  so  far  as  the  earnings  of  the  carrier  were  concerned,  this 
question  of  difference  in  the  rates  to  be  charged,  for  example,  from  St. 
Louis  and  Galveston,  respectively,  was  not  one  of  much  moment.  Of 
late  years,  however,  lines  have  been  extended  southward  into  Texas, 
whose  owners  or  managers  have  no  interest  in  the  lines  leading  north- 
ward from  Galveston.  The  consequence  is  that  the  differential  basis  of 
rates  so  long  in  use  has  been  for  several  years  the  subject  of  constant 
dispute,  and  as  a  matter  of  fact  has  not  been  faithfully  observed.  To  a 
great  extent  the  differentials  have  existed  merely  on  paper. 

Another  kind  of  differential  is  sometimes  employed,  although  it  is 
not  regarded  as  a  differential  in  the  sense  of  the  ordinary  use  of  that  term, 
namely:  where  a  group  of  carriers  concerned  in  a  given  business  agree 
that  one  of  those  carriers  may  make  certain  rates  between  two  given 
points  as  against  a  common  competitor.  An  example  of  this  is  found 
in  the  case  of  the  Trans-Continental  lines,  which  permits  the  Morgan 
and  Mallory  Steamship  lines  and  their  connections  west  of  New  Orleans 
and  Galveston,  respectively,  to  make  lower  rates  to  San  Francisco  than 
the  standard  all-rail  rates  on  certain  selected  commodities,  peculiarly  sus- 
ceptible to  carriage  by  sea,  in  order  to  compete  with  the  rates  via  the 
Panama  and  Cape  Horn  routes.  This  is  the  case  instanced  by  our  Can- 
adian friends,  of  the  Sunset  Route  having  a  differential  on  San  Francisco 
business.  I  call  the  attention  of  the  Board  to  the  fact  that  while  it  is 
stated  that  the  Sunset  Route,  which  means  the  Southern  Pacific  route — 
for  we  claim  that  trade  mark — is  not  alone  in  the  enjoyment  of  these 
lower  rates.  The  Cromwell  Line,  in  connection  with  the  Texas  &  Pacific, 
and  the  Mallory  line,  in  connection  with  any  of  the  rail  lines  from  Gal- 
veston, particularly  the  Atchison,  Topeka  &  Santa  Fe  Ry.,  which 
controls  a  line  from  Galveston  to  San  Francisco,  operating  over  the 
Southern  Pacific  383  miles,  by  contract — which  gives  it,  I  think,  an  ad- 
vantage over  what  it  would  have  if  it  owned  the  line — enjoy  that  same 
differential,  so-called.  This  is  not  a  differential  because  the  rail  lines  can, 
at  their  pleasure,  make  the  same  rates.  Some  of  them  do  make  the  same 
rates.  The  reason  why  it  is  done  is  because  of  all  this  competition  by  the 
all-ocean,  or  the  Panama  route,  from  New  York,  to  meet  which,  if  rates 
were  made  through  Chicago,  would  involve  reduced  rates  for  all  this 
intermediate  territory  (pointing  to  map).  These  lines  do  not  want  to 
reduce  these  rates;  they  would  lose  money  if  they  did.  What  they 
would  gain  here  (pointing  to  map)  against  these  competitors  would  not 
compensate  for  the  loss  here  (pointing  to  map).  Therefore,  they  consent 
*o  the  use  of  these  commodity  rates  from  the  New  York  Piers  of  the 


72 

Mallory  line,  of  the  Cromwell  line  or  of  the  Morgan  line  to  San 
Francisco. 

ARBITRATOR  DAY— Mr.  Stubbs,  I  do  not  know  that  I  quite  grasp 
that.  Do  I  understand  you  to  say  that  this  is  a  concession  to  the  part 
water  lines  in  competition  with  the  Panama  and  all-ocean  routes,  that 
these  lines  would  carry  all  the  traffic? 

MR.  STUBBS— Let  me  finish  the  paragraph.  The  difference  in  the 
rates  is  permitted,  not  for  the  purpose  of  benefiting  the  Gulf  routes,  but 
for  the  purpose  of  shifting  the  burden  of  meeting  competition  of  a  low- 
cost  competitor  on  to  those  lines  which  are  better  able  to  bear,  it, — 
that  is,  can  bear  it  with  the  least  inconvenience  and  loss  to  themselves. 
Perhaps  I  might  give  you  an  illustration.  It  may  be  treated  of  later  on, 
but  it  will  fall  in  here  very  well.  At  the  time  the  Columbian  Line  com- 
petition opened  in  1893,  all  the  railroad  lines  were  forced  out  of  the 
traffic,  because  the  rates  were  so  low  that  they  could  not  compete  with 
the  rates  made  by  the  steamship  line,  except  at  a  very  large  sacrifice  on 
intermediate  business  which  was  only  indirectly  effected  by  competition 
from  New  York.  But  they  threw  the  whole  responsibility,  the  whole 
burden  of  meeting  that  competition,  by  carrying  freight  as  low  as  30  cents 
per  100  pounds  from  New  York  to  San  Francisco,  on  these  Gulf  lines, 
for  they  could  do  it;  their  intermediate  business  was  not  involved;  it  was 
involved,  that  is  true,  but  it  was  so  small  compared  with  this  volume 
of  intermediate  business  (pointing  to  map),  that  they  could  afford  to  do 
it,  and  somebody  had  to  take  up  the  gauge  of  battle  and  conduct  the 
traffic.  Now,  since  that  time,  there  has  been  no  composition  of  the  differ- 
ences with  the  Panama  road.  They  stand  in  the  market  ready  to  take 
business  that  offers,  at  any  rate  that  will  take  it.  There  are  certain  com- 
modities, which,  not  so  much  from  their  nature, — not  altogether  from 
their  nature — but  from  their  point  of  origin,  that  are  peculiarly  subject 
to  this  water  competition.  The  bulk  of  the  traffic  for  San  Francisco 
comes  from  points  west  of  Pittsburgh.  These  lines  running  west  (point- 
ing to  map)  do  not  wish  to  carry  lower  rate's  from  Pittsburgh,  or  this 
intervening  territory,  than  from  New  York  over  their  own  lines.  If  they 
put  in  these  Pier  rates  from  New  York  City,  according  to  their  policy, 
they  would  have  to  make  these  rates  the  maximum  for  all  intermediate 
territory,  and  it  would  involve  a  loss  which  would  not  be  compensated 
by  the  amount  of  traffic  they  would  take.  Therefore,  they  consent  to 
this  difference  in  rates.  That  is  all  there  is  to  this  story. 

There  is  yet  another  class  of  differentials  which  originated  in  the 
opening  of  circuitous  routes  for  competition  in  carrying  trade  established 
on  shorter  and  more  direct  routes.  These,  in  the  common  language  of 
the  profession  are  termed  "differentials  in  favor  of  weaker  lines" — lines 
which,  upon  the  merits  of  their  service,  cannot  successfully  compete  for 
the  business,  but  claim  a  share  of  it,  as  the  reward  of  virtue,  the  price  of 


73 

maintaining  reasonable  rates.  The  differentials  which  are  the  subject  of 
this  controversy  between  the  Canadian  line  and  the  American  lines  fall 
within  this  class.  This  class  of  differentials  in  great  part,  grew  out  of 
the  formation  of  through  lines  between  two  points  or  territories  by  cir- 
cuitous routes.  In  many  cases  the  through  line  is  made  up  of  carriers 
none  of  whose  lines  were  projected  or  constructed  with  a  view  to  en- 
gaging in  the  traffic  laid  open  to  competition  by  the  formation  of  a 
through  line  by  combination  between  the  several  individual  carriers. 

For  example,  the  Canadian  Pacific  road  was  not  projected  or  built 
for  the  purpose  of  developing,  fostering  or  sharing  the  carrying  trade 
between  San  Francisco  and  the  Eastern  part  of  the  United  States.  Nor, 
were  any  of  the  United  States  connections,  running  from  the  border 
down  into  New  England  and  the  middle  and  southern  States  projected 
or  built  with  any  such  purpose  in  view.  Nor,  were  its  connections  at 
Gretna  and  at  Minneapolis  built  with  any  expectation  of  participating  in 
said  trade.  Nor  was  the  Pacific  Coast  Steamship  Line  between  San  Fran- 
cisco and  British  Columbia  established  with  any  such  prospect  or  inten- 
tion. After  they  were  built  and  the  various  connections  made,  then,  and 
not  until  then,  it  was  seen  that  there  was  a  business  opened — if  not 
opened,  certainly  more  largely  developed,  more  considerably  fostered 
and  sustained  by  other  and  more  direct  lines,  which  might  be  made  more 
or  less  contributory  to  their  lines  if  combined  to  make  one  through  route. 
The  route  having  been  opened  the  newer  and  longer  lines  entered  the 
field  of  competition  against  the  older,  shorter  and  more  direct  lines  by 
cutting  the  latter's  rates.  When  its  cuts  were  met  further  cuts  were 
made,  which  being  met  in  turn  the  operation  was  repeated  until  the  rates 
by  all  routes  were  see-sawed  down  to  a  level  which  not  only  made  them 
unremunerative  to  any  of  the  carriers  forming  in  whole  or  in  part  any 
of  the  several  competing  lines,  but  sometimes  the  level  was  very  much 
below  cost.  In  a  fight  of  this  kind,  paradoxical  as  it  may  seem,  the 
stronger  line  always  got  the  worst  of  it.  The  reason  is  apparent.  The 
traffic  was  fixed  to  its  route  and  any  reduction  from  its  rates  in  use  pre- 
vious to  and  at  the  time  the  competing  line  using  the  circuitous  route 
entered  the  field  as  a  competitor  was  a  loss;  the  greater  the  reduction 
the  greater  the  loss.  The  weaker  or  longer  line,  on  the  other  hand,  not 
having  any  business  at  the  outset  had  nothing  to  lose.  Everything  was 
gain  to  it  which  appeared  to  show  an  earning  above  the  actual  cost  of 
handling  the  particular  lot  of  freight.  Quite  a  distinction  between  that 
and  the  average  cost  of  handling  all  business.  Such  an  unequal  warfare 
could  not  long  continue,  and  the  common  result  was  that  the  stronger 
line  sought  for  terms  and  ultimately  bought  the  weaker  line  off,  either 
by  paying  it  an  agreed  proportion  of  its  earning  under  a  pooling  arrange- 
ment, previous  to  the  enactment  of  the  Inter-State  Commerce  Law, — 
or  by  agreeing  that  its  rates  should  be  maintained  at  a  certain  rate  of 


74 

difference  higher  than  the  rates  of  the  longer  lines.  The  latter  has  been 
the  common  practice  only  since  the  prohibition  of  pooling.  Sometimes 
an  agreement  of  this  character  has  been  reached  between  the  opposing 
lines  without  first  trying  the  arbitrament  of  war,  the  weaker  line  demand- 
ing a  portion  of  the  business  or  an  adjustment  of  the  rates  that  would 
enable  it  to  carry  some  of  the  business  and  the  stronger  line  or  lines 
yielding,  as  a  matter  of  expediency,  without  a  fight.  That  was  the  case 
as  between  the  Canadian  line  and  the  American  lines.  It  is  needless  for 
us  to  represent  to  the  Board  that  this  class  of  differentials  is  and  always 
has  been  obnoxious.  They  have  been  always,  and  continue  to  be,  re- 
garded as  partaking  of  the  ancient  custom  in  certain  countries  of  pay- 
ments to  certain  men  who  were  allied  to  robbers  to  be  by  them  protected 
from  pillage.  They  have  been  denounced  as  a  public  wrong  and  an 
abuse  of  corporate  power  in  that  they  coerce  shippers  to  use  inferior 
transportation  facilities  and  instead  of  promoting,  were  really  in  restraint 
of  trade.  No  carrier  ever  submitted  willingly  to  that  sort  of  an  agreement. 
The  submission  has  always  been  under  protest  and  rarely,  if  ever,  have 
such  contracts  been  continuously  performed  in  good  faith.  In  support 
of  these  statements  permit  a  reference  to  the  findings  of  the  Inter-State 
Commerce  Commission,  expressed  in  annual  reports  and  otherwise,  after 
inquiry,  namely: 

(Third  Annual    Report   Inter-State   Commerce    Commission.) 

"By  traffic  arrangement  between  American  companies  and 
Canadian  companies  differentials  are  allo\yed  to  the  latter  which 
furnish  an  inducement  to  shippers  to  patronize  those  lines  for 
trade  for  which  the  quickest  transit  is  not  urgent.  These  differ- 
entials are  conceded  to  avoid  rate  wars  and  they  involve  a  diver- 
sion of  whatever  business  the  reduced  rates  may  invite."  (Para- 
graph 3,  Page  60.) 

(Fourth     Annual     Report     Inter-State     Commerce     Commission. 

November  29,  1890.) 

"It  is  not  uncommon  to  find  that  a  road  is  able  to  compete 
for  an  important  business,  but  is  nevertheless  at  a  disadvantage 
in  the  competition  by  reason  of  greater  length  of  line  or  heavier 
grades  or  of  other  unfavorable  circumstances,  and  that  in  con- 
sequence it  is  unable  to  obtain  what  it  deems  a  fair  share  of  busi- 
ness in  open  competition  with  rivals  who  offer  the  same  rates  at 
every  competing  point.  It  is  therefore  compelled,  if  it  would 
share  the  business,  to  make  lower  rates  and  their  rivals  recognize 
this  necessity  and  allow  an  agreed  division  of  business  between 
all  competitors  to  be  effected  by  giving  the  carriers  thus  unfavor- 
ablv  circumstanced  what  are  called  'differential  rates'.  The  con- 


75 

ceding  of  a  differential,  however,  is  very  likely  not  to  be  made 
willingly,  but  comes  under  the  stress  of  compulsion  at  the  end 
of  a  disastrous  rate  war.  When  once  made  there  is  constantly 
liability  that  under  the  feelings  engendered  by  competition  or  from 
a  conviction  that  it  ought  not  to  have  been  granted,  it  will  be 
dissented  from  and  an  unprofitable  rate  offered  by  competitors 
instead."  (Pages  22  and  23.) 

Further, — "The  differential  lines  are  those  which  on  account 
of  longer  lines  and  differences  in  facilities  or  owing  to  their 
through  routes  being  partly  by  water,  or  from  other  disadvantages 
might  not  command,  at  even  rates  with  the  more  direct  lines,  an 
amount  of  tonnage  which  under  the  customary  methods  of  deter- 
mining such  matters,  would  be  considered  a  fair  proportion." 
(Page  210.) 

The  history  of  this  dispute  may  be  briefly  stated  as  follows:  The 
Canadian  line  was  opened  for  business  in  June,  1886.  At  that  time  all 
of  the  principal  lines  which  are  parties  to  this  contention  upon  the  side 
of  the  American  lines  were  completed,  and  had  been  for  several  years 
engaged  in  the  carrying  trade  of  San  Francisco,  with  the  exception  of 
the  Chicago,  Rock  Island  &  Pacific  Railway  Company  in  respect  to  its 
line  between  the  Missouri  River  and  Denver;  the  Colorado  Midland 
Railway  Company  and  the  Missouri  Pacific  Railway  Company  in  respect 
to  its  line  west  of  Kansas  City.  These  American  lines  were  then  involved 
in  the  most  serious  rate  war  of  their  experience;  a  rate  war  which  had 
its  origin  in  a  claim  of  the  same  nature  as  the  demand  of  the  Canadian 
line  in  respect  to  all  California  traffic;  that  is  to  say,  one  of  the  Ameri- 
can lines  had  demanded  of  the  other  lines  an  adjustment  of  rates  or  a 
guarantee  of  earnings  greatly  in  excess  of  what  it  had  been  able  to  take 
upon  the  merits  of  its  service  under  an  equality  of  rates.  The  minimum 
rates  caused  by  this  war,  which  began  in  1886,  did  not  obtain  all  through 
1887;  a  truce  was  agreed  to  some  time  in  the  spring  of  1887,  but  rates 
were  not  and  could  not  be  restored,  to  the  normal  basis  immediately  for 
several  reasons,  one  of  which  was  the  uncertainty  of  the  effect  which 
the  Canadian  line  entering  the  field  of  competition  would  have  and  the 
dbubtfulness  as  to  the  disposition  of  that  line  to  join  in  the  necessary 
co-operation  to  avoid  a  continuance  of  the  unprofitable  rates  for  Califor- 
nia business  then  prevailing  on  the  American  lines.  Now  let  me  digress 
for  a  moment.  With  respect  to  1886  and  1887  I  wish  to  criticise  a  remark 
made  by  the  Canadian  line  representative — I  will  not  refer  to  it — to  the 
effect  that  previous  to  its  entering  upon  membership  with  the  Trans- 
Continental  Association  it  observed  the  percentage  scale  of  differentials. 
It  never  had  differentials;  it  was  not  in  it.  The  rates  were  too  low,  and 


76 

when  there  was  a  fight  on  it  left  the  burden  of  the  fight  to  the  American 
lines.  I  read  now  from  "Exhibit  P";  it  is  the  testimony  in  a  report  from 
a  Committee, — the  Inter-State  Commerce  Committee  of  the  United 
States  Senate  Report  for  1888,  by  an  order  of  May  2nd, — that  is  the  only 
date  on  it,  May  the  2nd,  i 


"Sir  William  C.  Van  Home,  President  of  the  Canadian  Pacific 
Railway  was  before  the  Senate  Committee.  The  Chairman  asked 
Mr.  Van  Home  this  question:  'I  see  by  reference  to  your  report  of 
1886  that  in  the  first  year  of  your  through  traffic  your  line  suc- 
ceeded in  securing  a  considerable  share  of  the  through  traffic  in 
competition  with  Trans-Continental  lines  of  the  United  States 
and  mostly  at  remunerative  rates;  does  that  still  continue?'  To 
which  Sir  William  C.  Van  Home  replied:  'We  get  considerable 
through  passenger  traffic,  very  little  through  freight  traffic;  it 
does  not  pay  and  we  do  not  seek  it.' " 

Added  to  this  was  the  fact  that  the  Inter-State  Commerce  law  had 
just  become  effective  and  few  of  the  railroads  in  the  country  knew  just 
where  they  stood,  or  would  stand  under  that  law. 

An  officer  of  one  of  the  California  roads  was  delegated  to  visit  the 
headquarters  of  the  Canadian  line  to  confer  with  its  principal  officers  and 
obtain,  if  possible,  its  promise  to  co-operate  in  an  organization  having 
for  its  object  the  making  and  maintaining  of  reasonable  rates  for  the 
carrying  of  traffic  between  the  Pacific  Coast  and  the  eastern  parts  of  the 
United  States.  The  result  was  a  meeting  of  the  Trans-Continental  lines 
and  a  re-organization  of  the  Trans-Continental  Association.  At  this 
meeting  the  Canadian  line  demanded  the  right  to  discount  the  San 
Francisco  rates  of  the  American  lines;  indeed,  this  was  understood  to 
have  been  a  condition  pre-requisite  to  its  attendance  upon  the  meeting 
and  joining  and  co-operating  with  the  other  Trans-Continental  lines.  I 
am  the  officer  who  visited  the  headquarters  of  the  Canadian  Pacific  line 
at  Montreal  to  invite,  as  its  representative  correctly  states,  the  Cana- 
dian line  to  join  with  the  American  lines  in  maintaining  rates — to  join 
in  a  co-operative  association  designed  to  maintain  rates,  but  I  had  to  cou- 
ple my  invitation  with  the  assurance  that  we  would  in  some  way,  how  we 
did  not  know,  because  of  the  Inter-State  Commerce  Law  and  the  inhibi- 
tion of  pooling,  but  that  we  would  in  some  way,  probably  by  differen- 
tial rates,  compensate  them,  as  the  term  goes,  pay  them  for  coming  in 
and  being  good  with  the  rest  of  us. 

My  interview  in  Montreal  was  with  Mr.  George  Olds,  then  General 
Traffic  Manager,  and  General  Manager  Van  Home,  who  was  not  at 
that  time  President,  I  believe.  The  principle  of  differential  rates  had 
never  before  been  conceded  in  Trans-Continental  territory.  All  the 


77 

American  lines  objected  to  it,  but  they  were  made  to  understand  that 
the  demand  of  the  Canadian  line  was  no  more  than  what  that  line  pro- 
posed enforcing,  in  so  far  as  it  could  do  so,  in  the  event  that  the  Ameri- 
can lines  undertook  to  co-operate  without  its  assistance.  In  other  words, 
they  were  given  to  understand  that  if  rates  were  advanced  to  any  rea- 
sonable basis  the  Canadian  line  would  use  the  tariff  of  the  American  lines 
simply  as  a  maximum  from  which  to  cut  and  that  these  cuts,  if  met  by 
the  American  lines,  would  result  in  forcing  the  whole  scheme  of  rates 
down  to  the  level  of  the  minimum  cost;  that  it  would  be  a  continuation 
of  the  battle  from  which  they  had  just  emerged  for  an  indefinite  time,  if 
indeed  there  would  ever  be  an  end  to  it.  If  it  had  not  been  for  the  re- 
straining features  of  the  Inter-State  Commerce  law,  the  exact  measures 
of  which  they  did  not  understand,  and  which,  to  most  railroad  operating 
officers  were  far  more  menacing  than  they  are  today,  they  would  not 
have  yielded  to  the  demand  of  the  Canadian  line  for  a  differential.  The 
adjustment  of  rates  would  have  been,  as  it  always  had  been,  on  the  basis 
of  equal  rates  for  all.  Possibly  a  pool  of  earnings  would  have  been  made 
in  which  the  Canadian  line  would  have  come  in  for  a  small  share,  but  the 
pool  would  also  have  guaranteed  a  fair  allotment  of  earnings  to  each 
and  every  other  line  as  well  as  to  the  Canadian  line,  or  they  might  have 
accepted  the  gauge  of  battle.  It  was  argued,  however,  that  the  Canadian 
line  was  unknown  to  American  shippers;  that  it  was  believed  it  would 
prove  to  be  no  thoroughfare  during  the  winter  months;  that  the  fact 
that  it  was  a  foreign  line  and  must  carry  goods  under  customs  regula- 
tions, would  be  very  prejudicial  to  it  in  the  minds  of  shippers.  These 
were  the  arguments  that  prevailed,  because  it  was  thought  that  at  any 
reasonable  difference  in  the  rates,  it  would  be  impossible  for  the  Canadian 
line  to  secure  much  traffic. 

Upon  the  organization  of  the  Trans-Continental  Association  at  this 
time,  the  rates  to  San  Francisco  by  the  American  lines  were  higher  than 
the  rates  made  to  San  Francisco  by  the  Canadian  line,  by  these  dif- 
ferences: 

From  New  York  and  common  points,  to  San  Francisco,  first  class,  30 
cents,  scaled  down  to  5  cents,  the  lowest  class;  the  standard  rates  being, 
first  class,  $4.00,  scaled  down  to  $1.10  for  fourteenth  class. 

From  Chicago  and  common  points,  to  San  Francisco,  first  class,  20 
cents,  scaled  down  to  5  cents,  the  lowest  class;  the  standard  rates  being 
first  class,  $3.25,  scaled  down  to  88  cents  for  fourteenth  class. 

Later,  from  St.  Paul  and  Minneapolis  to  San  Francisco  the  difference, 
or  differential,  was,  first  class,  15  cents,  scaled  down  to  5  cents,  for  the 
lowest  class;  the  standard  rates  being  $2.80,  for  first  class,  scaled  down 
to  80  cents  for  fourteenth  class. 

These  rates  prevailed  until  May,  1888,  when  the  Canadian  line  de- 
manded that  the  differentials  be  increased  to  the  scale  of  40  cents  for 


78 

first  class,  down  to  10  cents  for  the  lowest  class  from  New  York.  The 
matter  was  eventually  referred  to  the  Chairman  of  the  Association  to 
negotiate  with  the  Canadian  line  on  this  question,  with  the  result  that  it 
was  awarded  a  differential  of  40  cents  on  first  class,  scaled  down  to  J\ 
cents  on  the  lowest  class,  on  business  to  and  from  New  York.  This  was 
the  transaction  in  reference  to  which  our  Canadian  friends  read  a  reso- 
lution that  was  passed  at  that  session  of  the  Trans-Continental  Associa- 
tion. This  was  the  resolution  as  read  by  our  Canadian  friend,  and  I  take 
it  to  be  correct,  I  have  not  tested  it. 

"RESOLVED,  that  it  is  the  sense  of  our  Committee  that  the 
differentials  allowed  the  Canadian  Pacific  Railway  Company 
should  at  all  times  be  fixed  upon  such  a  basis  as  will  secure  to  that 
Company  a  fair  and  reasonable  share  of  the  overland  tonnage, 
and  that  if  the  present  figures  do  not  accomplish  that  result,  they 
should  be  so  modified  as  to  bring  it  about.  To  this  end  the  Chair- 
man is  authorized  to  negotiate  for  the  American  lines  with  the 
Canadian  Pacific  Railway  Company  and  make  such  changes  from 
time  to  time  as,  in  his  judgment,  are  warranted,  with  the  under- 
standing that  the  same  differentials  shall  apply  to  St.  Paul  and 
Minneapolis  traffic  via  the  Northern  Pacific  as  may  be  awarded  the 
Canadian  Pacific  Railway  Company;  it  being  understood  that 
these  differentials  shall  apply  via  the  Ocean  routes  only." 

That  resolution  was  passed,  but  it  was  in  pursuance  of  a  contract,  a 
contract  that  was  made  under  the  fear  of  the  total  destruction  of  our 
traffic  unless  we  made  it. 

These  latter  differentials  continued  in  force  until  the  middle  of  1889, 
when,  upon  the  demand  of  several  of  the  American  lines,  they  were  re- 
duced to  the  following  scale:  For  St.  Paul,  from  15  cents  first  class,  scaled 
down  to  5  cents  for  lowest  class;  the  standard  rates  being  $3.50  first 
class,  $1.00  lowest  class.  For  Chicago,  17^  cents  first  class,  scaled  down 
to  5  cents  for  lowest  class;  the  standard  rates  being  $3.90  first  class, 
$1.10  lowest  class.  For  Detroit,  21  cents  for  first  class,  scaled  down  to 
5  cents  for  lowest  class;  the  standard  rates  being  $3.95  first  class,  $1.15 
for  lowest  class.  For  Pittsburgh,  22  cents  for  first  class,  scaled  down  to 
5  cents  for  lowest  class;  the  standard  rates  being  $4.00  first  class,  $1.15 
lowest  class.  For  Atlantic  Seaboard,  28  cents  differential  for  first  class, 
scaled  down  to  5  cents  for  lowest  class,  with  a  special  differential  of  7} 
cents  for  wool  in  grease;  the  standard  rates  being  $4.20  first  class,  $1.20 
lowest  class. 

I  have  enumerated  these  differentials  (and  feel  like  apologizing  to  the 
Board  for  doing  so),  with  but  this  object  in  view,  to  show  that  in  no  case 
was  the  Canadian  Pacific  line  ever  given  a  10  per  cent  differential. 


79 

These  last  differentials  prevailed  until  1891,  when  in  lieu  of  differential 
rates  the  American  lines  guaranteed  the  Canadian  line  $500,000.00,  as 
gross  earnings  from  San  Francisco  business  for  a  year,  the  Canadian 
line  to  maintain  an  equality  of  rates  with  the  American  lines  and  the 
American  lines  to  be  credited  by  the  Canadian  line  on  their  guaranty, 
with  the  amount  of  its  gross  earnings  on  all  the  San  Francisco  business 
it  carried  at  equal  rates,  the  balance  or  deficiency  in  the  amount  guar- 
anteed to  be  paid  in  cash  by  the  American  lines.  Under  this  arrange- 
ment the  American  lines  paid  the  Canadian  line  the  sum  of  about  $472,- 
ooo.oo  for  account  of  San  Francisco  business  during  the  year  1891,  that 
line  having  carried  at  equal  rates  business  of  the  value  of  $28,000.00,  in 
round  numbers;  business  that  sought  its  line  without  any  effort  at  solici- 
tation, without  any  of  the  measures  which  all  the  American  lines  did 
and  were  compelled  to  adopt  and  actively  employ,  in  order  to  get  and 
keep  their  traffic.  Here  is  what  the  gentleman  representing  the  Cana- 
dian line  said  on  that  subject:  (reading  from  transcript  of  Mr.  Kerr's  ar- 
gument— see  page  34  hereof). 

"ARBITRATOR  WASHBURN— Did  you  maintain  agencies 
in  San  Francisco?" 

"MR.  KERR— Yes  sir." 

His  agent  did  not  work  freight  business,  he  was  a  Passenger  man; 
I  defy  the  Canadian  line  to  deny  it. — (commencing  again  to  read  from 
transcript  of  Mr.  Kerr's  argument): 

"ARBITRATOR  WASHBURN— During  the  entire  year?" 

"MR.  KERR — Yes  sir,  we  maintained  agencies.  We  did  not 
withdraw  any  agency." 

"ARBITRATOR  WASHBURN— You  used  the  same  effort  to 
get  business?" 

"MR.  KERR — I  would  not  say  that,  naturally;  but  we  did  not 
refuse  any  business  that  came  to  us.  We  had  the  same  facilities, 
our  agents  were  out  in  the  market  working  for  other  business. 
They  would  take  San  Francisco  business  at  even  rates,  but,  as 
you  see,  they  could  not  get  it.  The  differential  off,  we  were  out, 
clean  out  of  the  business." 

"ARBITRATOR  WASHBURN— They  did  solicit  the  busi- 
ness during  that  time?" 

"MR.  KERR — Yes,  in  a  line  with  their  other  business,  a  can- 
vassing agent  going  around  canvassing  for  other  freight,  naturally, 
if  he  heard  of  any  business  going  to  San  Francisco,  he  would  take 
it,  he  would  ask  for  i^,  he  would  want  it.  'What  is  your  rate?' 
'Our  rate  is  the  same  as  all-rail/  'Oh  no,  you  cannot  have  it;  we 
will  give  you  the  other,  but  we  will  not  give  you  that.'  " 


8o 

MR.  STUBBS — (laying  aside  the  transcript  from  which  he  had  been 
reading) — I  submit,  where  would  the  Union  Pacific  that  makes  in  con- 
nection with  the  Central  Pacific  the  shortest  and  most  direct  line,  that 
is  the  oldest  line  to  San  Francisco — where  would  that  company  be  today 
if  their  agencies  were  to  carry  out  the  program  indicated  for  his  agencies 
by  Mr.  Kerr  in  that  testimony?  Would  it  get  any  business  that  was 
competitive  as  between  themselves  and  the  "Santa  Fe"  or  the  Missouri 
Pacific  or  "Burlington"  or  "Rio  Grande"  or  Rio  Grande  Western  roads? 
In  three  months,  notwithstanding  all  its  natural  advantages,  more  than 
50  per  cent  of  its  business  wrould  leave  its  rails;  if  it  would  get  anything 
at  all  that  possibly  could  go  over  another  route.  The  Canadian  line  did 
not  work  for  the  business.  It  sat  down  on  its  subsidy  and  intended  to 
do  so  when  it  was  given  to  them  and  we  expected  it  to  do  so.  There 
has  never  been  any  test  of  what  it  can  do  at  equal  rates,  but  in  this 
connection  I  would  ask,  what  does  it  matter?  Under  the  submission 
in  this  case,  what  does  it  matter  whether  it  carried  a  dollar's  worth  of 
business,  or  $500,000.00  worth  of  business?  What  has  that  got  to  do 
with  the  submission  in  this  case?  It  is  a  fact  that  it  did  not  enforce  its 
right  to  the  business.  Is  there  any  other  conclusion  to  be  drawn  than 
that  this  bargain  with  the  Canadian  line,  this  purchase  of  the  neutrality 
of  the  Canadian  line,  shows  the  tremendous  power  of  that  company  to 
destroy  our  business  unless  we  bought  it  off?  I  have  a  statement  (marked 
"Exhibit  U")  that  was  prepared  by  Mr.  Countiss,  which  I  will  file  with 
the  Board:  "Payments  to  the  Canadian  Pacific  Railway  Co.  during  the 
year  1891,  as  finally  adjusted,  based  on  each  road's  actual  proportion  of 
gross  earnings  from  east  and  westbound  California  freight  traffic,  as  pro- 
vided by  Joint  Agreement  between  roads  in  interest,  effective  January 
ist,  1891."  This  statement  shows  the  amounts  of  the  payments — the 
amounts  paid  monthly,  by  each  particular  line  beginning  with  January 
and  ending. with  December,  1891.  The  total  earnings  of  the  Burlington 
and  Missouri  River  Railroad  Company  in  Nebraska  from  all  the  Cal- 
ifornia business — we  cannot  segregate  the  San  Francisco  business,  the 
way  the  records  were  kept — was  $192,926.24,  yet  the  "Burlington"  con- 
tributed $5,678.00  in  order  to  give  the  Canadian  Pacific  $500,000.00.  The 
total  earnings  of  the  Chicago,  Burlington  &  Quincy  R.  R.,  in  connection 
with  the  Burlington  and  Missouri  River  R.  R.,  were  $97,082.00  and  it 
contributed  $2,879.00.  The  combined  contribution  of  the  "Burlington" 
lines  was  about  $8,500.00  and  their  combined  earnings  was  about  $289,- 
ooo.oo.  They  submitted  to  that  tax  in  order  to  give  the  Canadian  line 
$500,000.00. 

ARBITRATOR  DAY— What  did  you  say  the  Burlington  &  Missouri 
River  R.  R.  was? 

MR.  STUBBS— The  Burlington  &  Missouri  River  R.  R.  was  $5,678.- 
oo  and  the  Chicago,  Burlington  &  Quincy  R.R.  was  $2,879.00,  they  should 


8i 

be  read  together,  and  the  total  earning  of  the  Burlington  &  Missouri 
River  R.  R.  was  $192,900.00  and  of  the  C.  B.  &  Q.  $97,000.00,  making  a 
total  of  about  $290,000.00,  and  out  of  the  gross  earning  of  $290,000.00 
from  all  California  business,  they  submitted  to  a  tax  of  something  in  the 
neighborhood  of  $8,500.00,  in  order  to  give  the  Canadian  line  $500,000.00. 
The  Chicago,  Kansas  &  Nebraska  Railway  Company's  total  earnings 
were  $167,762.00  and  the  Chicago,  Rock  Island  &  Pacific  $101,900.00 
which  made  a  total  earning  during  the  year  from  the  California  business 
— all  California  business — not  San  Francisco  business,  of  about  $269,- 
700.00  and  they  contributed  $8,000.00  towards  giving  the  Canadian  line 
$500,000.00  for  being  good.  The  Denver  &  Rio  Grande  Railway  made  a 
total  earning  of  $180,000.00  and  contributed  $5,000.00  in  order  to  give 
the  Canadian  line  $500,000.00.  The  Rio  Grande  Western  earnings  were 
$228,500.00  in  round  figures,  and  it  contributed  $6,698.00  to  feed  and 
support  the  Canadian  line.  The  Missouri  Pacific  Railway  made  a  total 
earning  of  $109,300.00  and  it  contributed  $3,261.00  in  order  that  the 
Canadian  Pacific  might  receive  $500,000.00.  The  St.  Louis  &  San  Fran- 
cisco Road  made  a  total  earning  of  $86,700.00  and  gave  $2,591.00  to  the 
Canadian  line  in  order  to  swell  its  earnings  to  $500,000.00.  The  Great 
Northern  Railway  line,  which  I  believe  at  that  time  was  a  connection 
of  the  Canadian  Pacific,  I  am  not  sure,  Mr.  Kerr  can  correct  me  about 
that — its  western  business  went  out  of  this  territory  via  the  Great  North- 
ern Ry.  through  Gretna  and  up  to  Winnipeg.  Its  total  earnings  were 
$22,922.00  and  it  contributed  $690.00  to  the  Canadian  Pacific  Railway  to 
give  it  $500,000.00.  Is  it  any  wonder  that  the  subsidy  ceased  with  one 
year's  trial?  Is  there  any  other  conclusion  to  be  drawn  from  that, 
than  that  it  represents  the  tremendous  force,  the  tremendous  weight  upon 
the  minds  of  the  officers  operating  those  lines,  of  the  threat,  the  fear  of 
what  the  consequence  would  be  if  they  did  not  buy  the  Canadian  line's 
peace,  its  good  will? 

In  January,  1892,  the  differential  scale  in  force  in  December,  1890, 
was  restored.  Those  were  the  low,  reduced  differentials  that  were  agreed 
to  at  the  San  Francisco  meeting,  I  think,  in  May,  1889,  and  continued 
until  November,  1892,  when  the  dissolution  of  the  Trans-Continental 
Association  was  forced  by  the  withdrawal  of  several  of  its  members.  With 
the  dissolution  of  the  Trans-Continental  Association,  the  differential  with 
the  Canadian  line  ended.  Early  in  1893  the  Columbian  Steamship  line 
out  of  New  York,  in  connection  with  the  Panama  Railroad  Company 
and  the  North  American  Navigation  company,  operating  a  steamship 
line  between  Panama  and  San  Francisco,  began  cutting  rates,  and 
initiated  the  most  violent  and  longest  war  in  rates  that  the  Trans-Con- 
tinental traffic  has  ever  been  subjected  to.  That  is  the  case  I  referred 
to  by  way  of  illustration  a  few  moments  ago.  During  this  period  the 
Canadian  line  was  not  much  of  a  factor  in  the  business  between  the 


82 

Atlantic  Seaboard  and  San  Francisco.  During  1893,  1894  and  1895,  the 
California  lines  organized  and  maintained  a  semblance  of  an  organiza- 
tion, for  the  purpose  of  protecting  that  portion  of  their  traffic  which  was 
not  involved  in  the  war  of  rates  with  the  Panama  line.  That  was  the 
traffic  west  of  Buffalo  and  Pittsburgh.  This  organization  was  called  the 
Trans-Continental  Freight  Rate  Committee.  The  Canadian  line  was 
not  a  party  to  it.  That  line  made  such  rates  as  it  pleased  and  its  opera- 
tions were  ignored  by  the  American  lines  in  respect  to  San  Francisco 
business.  Why?  The  rates  were  so  low  that  the  Canadian  line  could 
not  beat  them.  We  could  not  agree  with  the  Panama  route,  nor  among 
ourselves,  and  get  rates  up.  We  had  no  use  for  the  Canadian  line.  We 
let  it  go  alone.  In  1896,  an  agreement  was  attempted  to  re-organize  the 
Trans-Continental  Association.  In  order  to  accomplish  this  it  was  es- 
sential to  make  a  contract  with  the  Panama  route;  secondly,  to  come 
to  some  understanding  with  the  Canadian  line.  The  agreement  failed 
of  the  necessary  unanimous  ratification  for  reasons  which  are  not  neces- 
sary to  explain;  indeed,  I  do  not  know  that  anybody  can  explain  them, 
except  the  Union  Pacific  people  and  they  never  have,  but  all  the 
necessary  arrangements  had  been  completed  up  to  the  final  ratification. 
They  included  a  contract  with  the  Panama  route  whereunder  the  Trans- 
Continental  lines  leased  from  the  Steamship  Company  sufficient  space  in 
their  steamers  to  accommodate  a  stipulated  tonnage.  The  Canadian 
Pacific  demanded,  as  the  price  of  its  co-operation  in  this  agreement,  a 
differential  of  10  per  cent,  but  finally  consented  to  take  9  per  cent.  The 
representative  of  the  Canadian  line,  in  his  statement  yesterday  or  today, 
alluded  to  a  difference  that  arose  between  the  American  lines  and  the 
Canadian  line,  as  between  the  New  York  meeting  and  the  Milwaukee 
general  meeting,  and  the  later  Milwaukee  freight  meeting.  I  do  not 
consider  it  necessary  to  traverse  what  he  said.  I  do  not  think  the  Cana- 
dian Pacific  came  out  of  that  controversy  with  very  much  credit.  As  I 
have  said,  this  agreement  failed  of  final  ratification,  so  that  there  has 
been  no  agreement,  differential  or  otherwise,  between  the  Canadian  line 
and  the  American  lines  since  1892. 

ARBITRATOR  WASHBURN— Mr.  Stubbs,  I  asked  Mr.  Kerr  this 
morning,  whether  that  concession  of  9  per  cent — differential  rate  of  9 
per  cent — was  agreed  to  by  the  American  lines  and  he  said  it  was,  but 
that  the  agreement  was  never  put  into  effect. 

MR.  STUBBS — You  understand.  Mr.  Chairman,  how  these  things 
go;  that  we  will  get  together  and  agree  upon  all  details  of  a  contract, 
but  that  at  the  last  it  must  receive  unanimous  vote. 

ARBITRATOR  WASHBURN— I  only  mentioned  that  in  connec- 
tion with  your  remark  a  short  time  ago,  that  the  percentage  differential 
was  never  allowed  them. 

MR.   STUBBS— That  is  true. 


83 

ARBITRATOR  WASHBURX— Is  it  true  that  it  was  entered  into? 

MR.  STUBBS — It  never  was  consummated. 

ARBITRATOR  WASHBURN— But  it  was  agreed  to? 

MR.  STUBBS— Yes,  it  was  agreed  to,  but—  Xo,  I  have  never  said  it 
was. 

ARBITRATOR  WASHBURX— I  understood  you  to  say  so. 

MR.  STUBBS— Xo  sir. 

ARBITRATOR  WASHBURX— I  understood  Mr.  Kerr  to  say  this 
morning  that  it  was  conceded  to  him  by  the  American  lines  and  I  under- 
stood you  to  say  that  the  agreement  was  never  consummated. 

MR.  STUBBS — The  Chairman  must  be  very  well  aware,  I  know, from 
his  long  experience  in  the  business,  that  no  agreement  of  that  character 
becomes  complete  until  the  final  vote  upon  the  ratification  of  it.  We 
never  got  the  final  ratification  of  all  these  details.  The  most  that  can 
be  said  is  that,  if  the  Union  Pacific  had  voted,  finally,  to  confirm  that, 
it  would  probably  have  voted  under  a  9  per  cent  differential.  That  is  the 
most  that  can  be  said  in  that  direction.  XTo  one  can  say  whether  it  was 
the  9  per  cent  differential  that  moved  the  Union  Pacific  not  to  vote  for 
it  or  not.  Xo  one  can  say  that  if  the  Union  Pacific  had  voted  for  it,  that 
some  other  company  would  not  have  failed  to  ratify  it.  So  far  as  its 
binding  effect  upon  either  party  is  concerned,  it  is  just  the  same  as  if  the 
New  York  meeting  had  not  occurred,  or  that  the  Milwaukee  meeting 
had  never  occurred. 

As  I  have  said,  this  meeting  failed  of  final  ratification,  so  that  there 
has  been  no  agreement,  differential  or  otherwise,  between  the  Canadian 
line  and  the  American  lines  since  1892.  I  mean  by  that  that  since  1892 
the  Canadian  line  has  never  had  a  differential  on  San  Francisco  business. 
They  have  made  a  difference  in  rates,  but  a  differential  is  essentially 
the  product  of  an  agreement  and  we  have  never  agreed  since  that  time 
to  any  differential  rate  with  the  Canadian  line.  There  has  been  no  time 
since  1892,  during  which  any  one  of  the  American  lines  were  violating  any 
good  faith  or  any  agreement  whatsoever  with  the  Canadian  line,  or  could 
not  have  made  the  same  rates  as  the  Canadian  line.  In  practice,  however, 
the  Canadian  line  has  followed  the  American  Trans-Continental  lines  in 
the  publication  of  tariffs,  by  discounting  the  latter's  rates  to  San  Fran- 
cisco 10  per  cent,  thus  arbitrarily  increasing  the  difference  between  its  rates 
and  those  of  the  American  lines  on  the  lower  classes,  which  cover  the  bulk 
of  the  tonnage,  almost  100  per  cent  as  compared  with  the  difference 
prevailing  by  agreement  in  1892.  That  the  apparent  difference  between 
the  published  rates  of  the  Canadian  line  and  the  published  rates  of  the 
American  lines  was  not  in  practice  maintained,  has  been  for  a  long  time 
manifest  to  every  one  concerned  in  the  business.  I,  myself,  have  re- 
ceived complaints  from  Vice-President  Shaughnessy,  of  the  Canadian 
line,  alleging  that  he  knew,  as  a  matter  of  fact,  that  the  American  lines 


84 

were  not  observing  that  differential,  so-called  by  him.  Rate  cutting, 
open  and  secret,  has  been  general  and  frequent  and  it  is  the  judgment 
of  the  American  lines  that  primarily  the  attempt  of  the  Canadian  line 
to  carry  lower  rates  was  at  the  bottom  of  it,  although  it  must  be  con- 
fessed that  the  action  of  the  Canadian  line  will  not  account  for  all  the 
rare  demoralization  in  the  Trans-Continental  business.  However,  it  had 
so  much  to  do  with  it  that  the  call  for  the  August  meeting  at  Denver, 
which  adopted  the  agreement  to  arbitrate  this  question,  a  copy  of  which, 
I  believe,  was  sent  to  the  Canadian  Pacific  Ry.,  read  as  follows: 

"Westbound  rate  conditions  have  become  so  demoralized  by 
attempts  to  meet  Canadian  Pacific  differentials  that  I  think  the 
domestic  Trans-Continental  lines  should  immediately  decide  upon 
a  settled  policy  to  be  pursued  uniformly  by  all,  either  to  abandon 
sporadic  efforts  to  equalize  Canadian  Pacific  rates  and  strictly 
maintain  published  tariffs,  submitting  to  large  diversions  to  Cana- 
dian line,  or  to  formally  notify  Canadian  Pacific  that  United  States 
lines  will  no  longer  submit  to  its  demand  that  they  shall  make 
higher  rates,  and  then  proceed  jointly  by  published  rates  to  meet 
whatever  action  Canadian  Pacific  takes.  The  importance  of  this 
question  merits  the  attention  of  the  highest  officers  of  lines  en- 
gaged in  California  traffic  with  the  east.  Will  you  attend  a  meet- 
ing at  Denver  on  Monday  22nd  inst.,  for  the  purpose  of  discuss- 
ing and  disposing  of  this  question?" 

And  this  telegram  met  with  a  general  response. 

So  much  for  the  opening  of  the  case.  The  first  question  submitted 
to  the  Board  is :  "Whether  the  Canadian  line  is  or  should  be  entitled  to  a 
differential  under  the  rates  established  by  the  other  lines,  meaning  the 
American  lines."  Now  we  submit  that  a  differential,  in  the  sense  used 
here,  is  a  pre-determined  and  acknowledged  difference  between  the  re- 
spective rates  of  two  or  more  carriers  by  which  the  rates  of  one  or  more 
(usually  denominated  the  "differential"  line)  are  made  lower  than  the 
rates  of  the  others,  commonly  referred  to  as  the  "standard"  lines.  A 
differential  is  therefore  for  the  purpose  of  competition  and  advantage  in 
rates,  an  artificial  advantage.  Mr.  Kerr  in  his  statement  calls  it  a  money 
advantage.  Its  purpose  is  to  force  an  arbitrary  allotment  of  traffic,  or, 
to  use  the  language  of  the  Inter-State  Commerce  Commission,  an  arbi- 
trary distribution  of  traffic.  Here  is  what  the  Commission  says  on  that 
subject: 

"The  purpose  of  a  differential  is  undoubtedly  to  enable  a  line 
to  participate  in  traffic  which  it  could  not  obtain  if  it  were  com- 
pelled to  compete  at  the  same  rate  as  its  rivals.  It  is  in  its  essence 


85 

a  device  for  the  distribution  of  traffic.  At  the  basis  of  every  inquiry 
into  the  reasonableness  of  a  differential,  therefore,  lies  the  question 
whether  the  line  claiming  it  is  entitled  to  participate  in  the  traffic 
involved."  (Inter-State  Commerce  Commission  Opinion — "Cana- 
dian Pacific  Passenger  Differential,"  Page  8,  Paragraph  2.) 

That  reference  is  to  the  type-written  copy  that  I  had  of  that  report  and 
opinion,  before  I  had  received  the  printed  copy.  The  Canadian  line  does 
not  rest  its  claim  that  a  difference  should  subsist  between  its  rates  and 
those  of  the  American  lines;  that  the  latter  should  charge  more  than  it 
charges  for  moving  traffic  between  San  Francisco  and  this  eastern  terri- 
tory (pointing  to  map)  upon  the  ground  that  it  can  perform  the  service 
at  a  less  cost  to  itself  than  the  cost  to  the  American  lines.  On  the 
contrary,  its  acknowledged  grounds  of  contention  indicate,  prima  facie, 
that  its  cost  is  greater  than  the  cost  to  the  American  lines.  It  does  not 
ground  its  claim  upon  the  averment  that  the  rates  of  the  American  lines 
are  unreasonable  and  unjust  to  the  public;  nor  that  they  prevent  the 
largest  and  freest  interchange  of  trade  by  the  communities  served  by 
these  carriers.  On  the  contrary,  it  has  confessed  from  time  to  time,  and 
will  not  now  deny  that  the  rates  of  all  the  interested  lines  are  unrea- 
sonably low.  It  simply  avers  that  it  presents  certain  physical  charac- 
teristics which  when  contrasted  with  the  physical  characteristics  of  the 
American  lines  are  objectionable  to  the  shipper;  that  if  these  objection- 
able physical  features  are  not  in  some  way  counter-balanced,  it  cannot 
participate  in  the  subject  traffic.  As  a  counter-balance  to  the  alleged 
physical  difficulties,  it  demands  that  the  American  lines  shall  submit  to 
its  use  of  a  differential.  That  is  to/  say,  that  the  American  lines  shall 
give  it  an  artificial  advantage  in  rates,  as  a  means  whereby  to  force  traffic 
to  follow  its  line  as  against  the  American  lines.  It  justifies  this  demand 
by  the  assertion  of  a  right  to  a  fair  share  of  the  subject  traffic.  It  does 
not  define  the  term  fair  share,  whether  it  is  more  or  less  than  any  part 
of  the  whole;  whether  it  is  one  per  cent  or  more,  or  99  per  cent  or  less. 
The  Canadian  line's  claim  for  the  artificial  advantage  of  a  differential  is 
therefore  a  demand  for  the  arbitrary  allotment  to  it  of  some  portion  of 
the  American  traffic  in  which  the  American  lines  have  the  natural  advan- 
tage which  the  Canadian  line  claims  it  lacks.  The  design  of  the  differ- 
ential is  to  turn  the  traffic  from  routes  offering  natural  advantage  to 
routes  asserting  natural  disadvantage  and  its  ultimate  purpose  is  to  assure 
to  the  Candian  line  an  arbitrary,  but  indefinite,  allotment  without  inter- 
ference of  the  American  lines;  in  other  words,  to  remove  that  share  of 
the  traffic  from  rail  competition  and  allot  it  to  the  Canadian  line.  We 
meet  this  claim  by  the  general  averment  that  the  Canadian  line  is  but 
one  of  several  lines  engaged  in  the  traffic  which  are  in  like  manner  entitled 
to  an  allotment;  otherwise  one  line  is  protected  by  discriminating  against 


86 

the  rest.  Apportionment  by  arbitrary  means  that  does  not  provide  like 
adjustment  for  each  of  the  other  lines  engaged  in  the  traffic,  cannot 
be  just  and  right.  In  any  traffic,  natural  right  is  inherent  in  natural  ad- 
vantage. Natural  advantage  being  urged  against  the  American  lines  is 
an  admission  of  their  natural  right  in  the  traffic.  If  any  arbitrary  plan  of 
allotment  or  distribution  of  the  traffic  be  feasible,  it  cannot  be  right  and 
just  unless  giving  recognition  to  the  natural  rights  of  the  American  lines 
and  protecting  them  therein.  To  proceed  upon  any  other  theory  must 
sacrifice  the  natural  right  in  the  traffic  of  the  lines  having  natural 
advantage,  that  the  interest — not  the  right — of  the  Canadian  line  may  be 
protected  and  advanced. 

The  definition  of  the  word  "entitled,"  in  the  sense  it  is  used  in  the 
Denver  resolution,  is,  "Having  a  right  or  a  just  claim  to."  (Century  Dic- 
tionary) The  submission  to  the  determination  of  this  Board  proves  that 
the  asserted  right  is  not  absolute ;  otherwise  they  would  not  submit  it  to 
arbitration.  The  legal  rights  of  the  respective  parties  are  defined  by 
statutes;  hence  it  must  be  that  the  term  is  used  relatively,  strictly  in  the 
sense  of  the  term  "equitable  right,"  just  and  right  under  all  the  circum- 
stances of  the  particular  case,  fair  and  equal.  Under  this  exposition  of 
the  meaning  of  the  terms  employed,  the  first  question  may  be  re-stated, 
in  order  to  present  in  its  clearest  form  the  issue  raised,  in  the  following 
language : 


ist: — Has  the  Canadian  line  a  right  which  is  equally  fair  and 
just  to  all  concerned,  under  all  the  circumstances,  to  a  share  of 
the  San  Francisco  traffic  which  warrants  it  in  calling  upon  the 
American  lines  to  force  an  undefined  part  of  that  traffic  to  seek 
the  Canadian  line  instead  of  the  American  lines,  by  demanding 
higher  rates  than  are  accepted  by  the  Canadian  line? 


The  right  claimed,  not  being  asserted  as  an  absolute  right  or  a  legal 
right  but  an  equitable  right,  must  be  determined  by  the  circumstances 
and  conditions  surrounding  and  affecting  the  relations  of  both  parties, 
the  Canadian  line  and  the  American  lines,  to  the  subject  traffic.  There- 
fore, the  Canadian  line  sets  forth,  as  we  have  said,  certain  physical  char- 
acteristics alleged  to  subsist  with  its  line,  which  it  denominates  as  dis- 
advantages or  disabilities,  to  counter-balance  which  it  claims  the  right  to 
an  artificial  advantage  over  the  American  lines  in  the  shape  of  a  differ- 
ential. The  physical  disabilities  alleged  to  subsist  with  the  Canadian  line 
by  contrast  with  the  American  lines  are — 

That  its  line  is  a  broken  one,  meaning  thereby,  partly  by  water 


87 

and  partly  by  -ail,  necessitating  the  transfer  en  route  of  goods 
from  car  to  vessel  and  vice  versa; 

That  its  steamer  service  on  the  Pacific  Ocean  is  infrequent, 
causing  delays  as  compared  with  daily  service  offered  by  the 
American  all-rail  lines; 

That  it  is  the  longest  line  between  the  Atlantic  and  Pacific 
Seaboards,  as  against  the  Sunset  line  in  particular; 

That  it  has  not  yet  demonstrated  its  ability  to  make  time  equal 
to  the  time  made  by  the  direct  routes  over  the  American  lines 
and  by  the  Sunset  line; 

That  it  carries  the  goods  through  a  foreign  country  subjecting 
the  merchants  to  annoyances,  custom  requirements  and  delays. 

This  last  point,  according  to  my  recollection,  Mr.  Kerr  has  not  treated. 
I  gather  this  from  our  discussions  in  meetings  on  this  subject.  I  have 
pretty  generally  used  the  words  of  the  Canadian  Pacific  representative 
in  stating  their  claims  here. 

They  (that  is  these  disabilities)  are  necessarily  asserted  to  subsist 
with  the  Canadian  line  as  against  all  the  American  lines, — not  against  a 
selected  one,  or  some,  but  against  all  of  them;  not  against  the  all-rail 
lines  alone,  but  against  all  of  them.  Therefore,  we  submit  that  the  relative 
characteristics  so  asserted,  must  be  established  conclusively;  that  the 
physical  features  set  forth  as  comparative  disadvantages  must  be  proven 
to  be  peculiar  to  the  Canadian  line  and  to  it  alone  among  all  the  lines 
concerned;  otherwise  they  do  not  adequately  support  its  contention,  if, 
indeed,  they  afford  any  support  whatever.  If  like  physical  features  are 
found  to  subsist  with  one  or  more  of  the  American  lines  in  the  same  or 
approximately  the  same  degree,  then  in  respect  to  them  the  Canadian 
line  is  under  no  disadvantage  compared  with  the  American  line  or  lines 
possessing  substantially  the  same  physical  features  and  is  not  entitled  to 
a  differential  under  their  rates.  If  it  is  not  entitled  to  a  differential 
against  some  of  the  American  lines,  it  is  not  entitled  to  a  differential 
against  any  of  them,  for  this  is  the  submission  in  this  case:  "Is  the  Cana- 
dian line  entitled  to  a  differential  under  the  rates  of  the  other  lines?"  Not 
under  the  rates  of  one  or  some  of  the  other  lines,  but  against  all  of  them. 
The  other  lines,  the  American  lines,  stand  as  a  unit,  as  opposed  to  the 
claim  of  the  Canadian  lines.  At  the  morning  session,  Arbitrator  Day 
asked  the  Canadian  line's  representative  the  question:  "Do  you  regard 
that  you  are  entitled  to  charge  a  lower  rate  on  California  traffic  than  is 
charged  by  the  Northern  Pacific  on  California  traffic,"  and  his  answer 
was,  "No;  if  they  use  the  water  lines," — and  yet  his  submission  is  that 
he  is  entitled  to  a  differential  under  the  rates  of  all  the  other  lines. 

Now,  assuming,  for  the  purpose  of  argument,  that  the  conditions  de- 
scribed do  subsist  with  the  Canadian  line  and  for  that  reason  that  line 


88 

cannot  secure  rightfully  the  traffic  which  belongs  to  it,  we  submit,  for 
the  consideration  of  the  Board,  that  there  is,  among  the  American  lines 
on  our  side,  a  number  of  lines  which  are  broken  in  the  sense  described; 
lines  which  are  subject  to  the  same  delays  incident  to  infrequent  steamer 
service;  lines  which  are  as  long — and  some  of  them  longer — than 
the  Canadian  line;  lines  which,  when  measured  by  these  alleged  hin- 
drances cannot  make  any  better  time  with  freight  than  can  be  made  by 
the  Canadian  line;  that  against  these  lines  the  comparative  disadvan- 
tages alleged  to  characterize  the  Canadian  line  do  not  subsist;  therefore, 
there  are  no  inequalities  or  disabilities  as  between  the  Canadian  line  and 
these  of  the  American  lines,  to  counter-balance  by  a  differential  or  any 
other  device.  It  follows,  that  if  per  se  the  physical  features  set  forth  by 
the  Canadian  line  as  characterizing  its  line,  constitute  substantial  ground 
for  a  just  claim  to  the  artificial  advantage  of  a  differential  as  an  offset 
to  the  facilities  offered  by  other  lines,  these  American  lines  may  justly 
claim  the  same  consideration.  Their  title  to  a  differential  is  quite  as 
good  as  that  of  the  Canadian  line,  and  to  give  the  Canadian  line  on 
account  of  the  physical  characteristics  referred  to,  any  artificial  advantage 
over  them,  would  be  unjustly  discriminative  and  inequitable  in  the  high- 
est degree.  It  would  be  to  declare  that  the  Canadian  line's  right  to  par- 
ticipate in  the  domestic  carrying  trade  of  San  Francisco  is  a  prior  right; 
its  title  a  higher  title,  than  the  right  and  title  of  the  American  lines  afore- 
said. The  Great  Northern,  at  Seattle,  the  Northern  Pacific  at  Tacoma 
and  Seattle,  connect  with  the  same  steamers  for  San  Francisco,  as  the 
Canadian  line  connects  with  at  Vancouver.  The  distance  from  Seattle  is 
804  miles  as  against  833  miles  from  Vancouver.  These  are  distances  that 
are  taken  from  the  official  schedule  of  distances  published  by  the  Pacific 
Coast  Steamship  Company.  The  Oregon  Railroad  &  Navigation  Com- 
pany connect  at  Portland,  Ore.,  with  steamers  for  San  Francisco  which 
are  owned  jointly  by  the  Oregon  Railroad  &  Navigation  Co.  and  the 
Pacific  Coast  Steamship  Company.  It  also  connects  with  the  Great 
Northern  Ry.  at  Spokane  and  with  the  Oregon  Short  Line  Railroad  at 
Huntington.  Huntington  is  on  the  Oregon  Short  Line.  The  latter,  in 
turn,  connects  at  Granger  with  the  Union  Pacific;  at  Salt  Lake  with  the 
Rio  Grande  Western,  which,  in  turn,  connects  with  the  Colorado  Mid- 
land, and  Denver  &  Rio  Grande,  and  at  Pueblo,  Colorado  Springs  and 
Denver,  they  connect  with  all  these  systems.  The  distance  from  Portland 
to  San  Francisco  is  653  miles  against  833  from  Vancouver.  These 
steamship  connections  which  are  actual,  and  not  merely  possible,  form 
the  following  through  lines  to  San  Francisco,  which  correspond  to  the 
Canadian  line  in  the  respects  described  and  are  therefore  justly  entitled 
to  every  consideration  as  an  offset  to  the  alleged  better  facilities  of  other 
lines,  that  the  Canadian  line  is  entitled  to  on  the  same  ground,  namely: 


89 


FROM  MINNEAPOLIS: 

FIRST,— The  Great  Northern  R'y  to  Seattle  and  San  Francisco. 
SECOND,— The  Northern  Pacific  R'y  to  Tacoma,  Seattle  and  San 
Francisco. 

FROM  OMAHA: 

There  are  three  routes  from  Omaha: 

FIRST, — The  Union  Pacific  Railroad  via  Granger,  the  Oregon  Short 
Line  Railroad  and  Oregon  Railroad  &  Navigation  Co.  to  Portland  and 
San  Francisco. 

SECOND,— The  "Burlington,"  out  through  Denver,  the  Denver  & 
Rio  Grande,  Colorado  Midland,  Rio  Grande  Western,  Oregon  Short  Line 
Railroad  and  Oregon  Railroad  &  Navigation  Company,  to  Portland, 
thence  to  San  Francisco. 

THIRD,— The  "Rock  Island,"  following  the  same  route  through 
Colorado  Springs  and  Denver,  thence  on  via  the  Colorado  Midland,  Den- 
ver &  Rio  Grande,  Rio  Grande  Western,  Oregon  Short  Line  and  Oregon 
Railroad  &  Navigation  Company,  to  Portland,  thence  via  Oregon  Rail- 
road &  Navigation  Company's  steamships  to  San  Francisco. 

FROM  KANSAS  CITY: 

There  are  three  lines  from  Kansas  City: 

FIRST, — The  Union  Pacific  Railroad  through  Denver,  Cheyenne, 
Granger,  Oregon  Short  Line  to  Huntington,  Oregon  Railroad  &  Navi- 
gation Company,  to  Portland,  thence  via  Oregon  Railroad  &  Navigation 
Company's  steamships  to  San  Francisco. 

SECOND,— The  Atchison,  Topeka  &  Santa  Fe  R'y  to  Denver,  Col- 
orado Springs  or  Pueblo,  where  they  connect  with  the  Denver  &  Rio 
Grande  and  Colorado  Midland,  in  connection  with  the  Rio  Grande  West- 
ern, thence  via  Oregon  Short  Line  Railroad  and  Oregon  Railroad  & 
Navigation  Company  to  Portland,  thence  via  Oregon  Railroad  and  Nav- 
igation Company's  steamships  to  San  Francisco. 

THIRD, — The  Missouri  Pacific  Railway;   the  same  way. 

And  now  to  illustrate:  The  Northern  Pacific  connections  at  Minne- 
apolis, these  blue  lines  (indicating  on  map),  are  identical  with  the  Cana- 
dian line  connections  at  the  same  point.  South  and  east  of  Minneapolis, 
the  Northern  Pacific,  the  Great  Northern,  and  the  Canadian  Pacific,  its 
"Soo"  line,  all  connect  with  identically  the  same  roads.  Therefore,  with 
respect  to  all  traffic  moving  via  Minneapolis,  to  or  from  San  Francisco, 


90 

these  two  lines,  the  Northern  Pacific — I  might  have  said  these  three  lines, 
the  Great  Northern,  the  Northern  Pacific  and  the  Canadian  line  arc  upon 
an  exact  equality  with  respect  to  the  service  performed  by  their  respective 
blue  line  connections.  West  of  Minneapolis  their  respective  physical 
characteristics  compare  as  follows: 

The  Canadian  line's  mixed  service  via  Vancouver  is — 

Rail  to  Vancouver,  1802  miles. 

Steamship  to  San  Francisco,  833       " 


The  entire  service  Minneapolis  via 

Vancouver  to  San  Francisco  being,  2635  miles. 

The  Northern  Pacific's  service  is — 

Rail  to  Seattle,  1922  miles. 

Steamship  to  San  Francisco,  804       " 


Total,  2726  miles. 

about  100  miles  longer.  Both  lines  have  exactly  the  same  connections 
at  Minneapolis  for  all  this  traffic;  and  both  lines  have  identically  the  same 
connections  here  (indicating  on  map).  That  is  to  say,  they  connect  with 
the  same  boats  operated  by  the  same  Steamship  Company.  In  other 
words  the  same  boats  carry  the  same  freight  for  both  lines.  Both  lines 
use  the  vessels  of  the  Pacific  Coast  Steamship  Company  for  the  Pacific 
Ocean  service.  Both  lines  are  broken  in  the  sense  described.  Both  are 
alike  subject  to  infrequent  steamer  service,  but  the  Northern  Pacific  is  the 
longer  line,  yet  there  is  no  good  operating  reason  why  they  should  not 
make  equally  good  time.  The  contrast  between  the  Canadian  line's  mixed 
service  between  Minneapolis  and  San  Francisco,  and  the  Northern  Pa- 
cific's mixed  service  between  the  same  points,  will  answer  for  a  contrast 
between  the  mixed  service  of  the  Canadian  line  and  the  Great  Northern, 
respectively,  between  the  same  points,  as  I  have  explained,  save  the  im- 
material difference  of  104  miles  in  the  length  of  the  Northern  Pacific  and 
the  Great  Northern  road,  making  the  Great  Northern  a  very  few  miles 
shorter  than  the  Canadian  line — I  will  give  it  to  you,  exactly;  the  North- 
ern Pacific  line  is  91  miles  longer  than  the  Canadian  line.  The  Great 
Northern  is  13  miles  shorter  than  the  Canadian  line  between  Minneapolis 
and  San  Francisco.  From  United  States  points  through  Minneapolis, 
obviously  then,  the  Canadian  line's  mixed  service  is  on  a  parity  with  the 
mixed  service  of  the  lines  having  terminus  at  Tacoma  or  Seattle,  that  is 
to  say,  the  Great  Northern  and  the  Northern  Pacific.  Consequently,  if 
the  Canadian  line  is  entitled  to  any  differential  as  against  the  two  lines 


91 

named,  it  must  be  for  its  line  east  of  Minneapolis.  Having  identically 
the  same  connections  at  Minneapolis  as  the  Northern  Pacific  and  Great 
Northern,  there  cannot  be  any  difference  as  compared  with  those  lines 
with  respect  to  all  this  country,  (indicating  on  map)  For  business  from 
the  Seaboard,  from  Portland,  Me.,  from  Boston,  Mass.,  from  New  York 
City,  from  Buffalo,  from  Baltimore,  from  Wheeling,  from  Pittsburgh, 
it  has  identically  the  same  routes  that  the  Northern  Pacific  and  the  Great 
Northern  must  use  to  get  that  business.  If,  then,  for  any  part  of  this 
business,  New  England,  for  example,  it  chooses  to  use  its  routes  via 
Sudbury  and  Montreal,  through  Ogdensburg,  N.  Y.,  or  through  Port- 
land, Me.,  is  it  entitled  to  a  differential  because  it  elects  to  use  those 
routes  as  against  the  very  same  connections  of  the  Northern  Pacific  and 
the  Great  Northern,  which  are  equally  open  to  its  use  at  the  same  rates, 
the  same  division  of  rates?  If  it  elects  to  use  that  line  and  if  it  can  es- 
tablish that  it  suffers  disability  by  using  that  line  east  of  Minneapolis, 
does  it  not  create  the  disability?  And,  if  it  creates  the  disability  can  it 
come  to  the  Northern  Pacific  and  Great  Northern  and  ask  them  to  com- 
pensate it  for  a  disability  of  its  own  creation  by  a  money  advantage? 
The  Omaha  lines  do  not  make  the  identical  connections  with  those  made 
by  the  Canadian  Pacific  at  Minneapolis,  but  the  difference  in  distance 
between  these  blue  line  points  (indicating  on  map)  and  Omaha  and  St. 
Paul  and  Minneapolis,  as  the  Board  well  knows,  is  not  material,  while  the 
character  of  the  service  east  of  Omaha  and  east  of  Minneapolis  is  the 
same.  Therefore,  the  Omaha  lines  (mixed  rail-and-water  lines  via  Port- 
land), compete,  or  should  compete  with  the  Canadian  line  upon  equal 
terms  so  far  as  the  service  east  of  Omaha  and  Minneapolis,  respectively, 
is  concerned,  for  San  Francisco's  trade  with  this  blue  line  territory  (in- 
dicating on  map).  West  of  Omaha,  the  service  of  the  broken  or  mixed 
rail-and-water  line,  via  Portland,  formed  by  the  Union  Pacific,  Oregon 
Short  Line  and  Oregon  Railroad  &  Navigation  Company  roads  compares 
with  the  mixed  service  of  the  Canadian  line  west  of  Minneapolis  as 
follows : 

Omaha  to  Portland,  Rail  service, 

Portland  to  San  Francisco,  Ocean  service, 

Total,        2476 

As  I  have  already  explained,  the  service  from  Minneapolis  via  Van- 
couver, by  the  Canadian  line,  is  2,635  miles.  The  difference  is  159  miles. 
Both  lines  are  broken  and  are  in  the  same  manner  subject  to  infrequent 
steamer  service,  while  the  difference  in  distances,  159  miles,  ought  not, 
as  the  Board  well  knows,  to  make  any  material  difference  in  the  time 
required  for  movement  of  the  traffic  between  shipping  point  and  destina- 


92 

tion.  A  comparison  of  the  Canadian  line's  service  west  of  Minneapolis, 
with  the  service  of  the  broken  mixed  rail-and-water  lines  from  Omaha 
via  Portland,  formed  by  the  "Burlington,"  Rio  Grande,  Oregon  Short 
Line  and  Oregon  Railroad  &  Navigation  Company's  roads — (indicating 
on  map)  these  lines  are  the  B.  &  M.  to  Denver — Oregon  Short  Line — to 
Portland — will  differ  from  that  just  made  between  the  Canadian  line  and 
the  Union  Pacific  line  only  in  the  respective  distances  between  Omaha 
and  Portland,  the  "Burlington"  line  being  367,  and  the  "Rock  Island" 
line  321  miles  longer  than  the  Union  Pacific  line,  which  would  make  them 
respectively  longer  than  the  Canadian  line  by  208  and  162  miles.  Like- 
wise the  broken  lines,  mixed  rail-and-water,  from  Kansas  City,  via  Port- 
land— I  have  already  pointed  them  out — which  lines  serve  the  same  blue 
line  territory  with  facilities  which  are,  for  the  most  part,  equal  to  those 
offered  by  the  Minneapolis  and  Omaha  lines,  respectively,  as  before  de- 
scribed, compare  with  the  Canadian  line  about  as  the  Union  Pacific's 
Portland  line  does.  The  difference  is  in  the  mileage  to  Portland.  This 
comparison  shows  the  Kansas  City  lines  via  Portland,  respectively,  to  be 
longer  than  the  Canadian  lines  from  Minneapolis  as  follows: 

The  Union  Pacific  line total  2703  miles,  — by     68  miles 

The  Atchison,  Topeka  &  Santa  Feline.    "      2813       "      —by  178 
The  Missouri  Pacific  line "      2818       "      -by  183       " 

From  Portland  the  steamer  sailings  are,  perhaps,  more  frequent  than 
from  Vancouver  and  Seattle,  but  that  would  count  for  very  little  against 
the  all-rail  lines'  daily  service,  in  that  they  sail  once  in  three  days  against 
sailings  every  five  days  from  Vancouver  and  Seattle — as  stated  by  the 
representative  of  the  Canadian  line  in  his  argument. 

These  comparisons  are  just  and  applicable  to  all  the  traffic  which 
may,  or  can,  move  via  Minneapolis,  via  Omaha,  via  Kansas  City,  to  or 
from  San  Francisco,  and  the  whole  blue  line  territory  shown  on  this  map. 
Minneapolis,  Omaha  and  Kansas  City,  as  the  members  of  this  board  well 
know,  are  common  base  points  for  San  Francisco  rates — common  gate- 
ways through  which  the  San  Francisco  trade  with  this  blue  line  territory 
moves  upon  an  equality  as  to  rate.  Very  much  the  largest  share  of  the 
subject  traffic  passes  through  these  gateways.  The  Canadian  line  uses  its 
Minneapolis  connections  for  all  of  its  traffic  with  this  entire  blue  line  ter- 
ritory (indicating  on  map)  except  the  Atlantic  Seaboard;  hence,  with 
that  exception,  the  Canadian  line  and  the  several  American  lines,  so  far 
as  contrasted,  are  on  a  parity  in  respect  to  that  part  of  their  respective 
service  or  the  service  of  their  respective  connections,  east  of  these  com- 
mon gateways,  so  that  the  contrast  of  these  lines  west  of  these  gateways 
is  final  and  complete.  The  Atlantic  Seaboard  traffic  is  moved  by  the 
Canadian  line  via  Sudbury  and  Montreal,  Newport,  Vt.,  and  Ogdensburg, 


93 

N.  Y.,  but  the  American  lines  mentioned  use  the  Minneapolis,  Kansas 
City  and  Omaha  gateways  for  that  traffic  also.  That  is,  they  use  these 
gateways  for  New  England  and  Middle  States  traffic  as  well  as  for  this 
western  traffic.  The  Minneapolis  connections  of  the  Canadian  line,  which 
are  identical  with  the  connections  of  the  Great  Northern  and  the  North- 
ern Pacific,  are  open  to  the  Canadian  line  for  Atlantic  Seaboard  traffic 
upon  the  same  terms  as  they  are  open  to  and  used  by  the  Great  Northern 
and  the  Northern  Pacific  and  we  make  the  point  here  that  it  follows, 
necessarily,  that  if  the  Canadian  line  elects  to  use  the  Sudbury-Montreal 
line  instead,  that  is,  instead  of  the  same  connections  which  the  Great 
Northern  and  Northern  Pacific  use  via  Minneapolis — that  if  it  thereby 
incuij  or  subjects  itself  to  any  disadvantages  or  disabilities  as  compared 
to  the  American  lines,  those  disadvantages  are  of  its  own  creation  and 
it  cannot  thereon  build  a  just  or  reasonable  claim  that  they  should  be 
counter-balanced  by  an  artificial  advantage  in  rates.  We  will  proceed 
with  the  contrast,  however. 

From  New  England  and  Middle  States  territories,  the  Northern 
Pacific,  Minneapolis-Seattle  route  is  longer  than  the  Canadian  line's 
Vancouver  route  from  all  points  save  Philadelphia  and  Baltimore  and  in 
these  cases  the  difference  in  distance  is  not  material.  It  would  be  en- 
tirely overcome,  and  the  comparison  reversed,  the  Canadian  line  being 
shown  as  the  shorter,  if  the  Canadian  line  would  use  this  line  (indicating 
on  map  the  line  via  Minneapolis).  The  Great  Northern,  Minneapolis- 
Seattle  route  is  longer  than,  or  is  practically  the  same  length  as  the  Cana- 
dian line's  Vancouver  route,  except  from  Philadelphia  and  Baltimore, 
but  these  differences  would  be  overcome  if  the  Canadian  line  would  use 
the  same  connections,  they  being  equally  open  to  it  east  of  Minneapolis, 
as  are  used  by  the  Great  Northern.  The  distance  is  practically  the  same, 
possibly  a  little  shorter,  about  thirteen  miles,  I  think  I  stated,  but  as  I 
said  in  the  case  of  the  Northern  Pacific  this  distance  would  be  overcome 
if  the  Canadian  line  would  use  the  same  connections  east  of  Minneapolis 
that  the  Great  Northern  uses.  The  broken  routes  via  Omaha  and  Port- 
land, Ore.,  compare  with  the  Canadian  line's  Vancouver  route,  as  fol- 
lows: 

The  Union  Pacific-Oregon  Short  Line's  Portland  route  is  prac- 
tically of  the  same  length  as  the  Canadian  line's  Vancouver  route  from 
Portland,  Me.,  Boston  and  New  York  City  and  is  only  260  miles  shorter 
from  Philadelphia,  but  these  differences  would  be  reduced  to  insignifi- 
cance were  the  Canadian  line  to  use  its  Minneapolis  route.  The  "Bur- 
lington," Rio  Grande-Oregon  Short  Line,  Portland  route  is  longer  from 
all  New  England  and  Middle  States  cities,  except  Baltimore,  where  the 
difference  is  not  material,  and  the  conditions  would  be  reversed  by  the 
Canadian  line's  use  of  its  Minneapolis  route.  The  "Rock  Island's" 
Rio  Grande-Oregon  Short  Line,  Portland  route  compares  the  same  prac- 


94 

tically  as  the  ''Burlington."  The  Missouri  Pacific's  Rio  Grande-Oregon 
Short  Line,  Portland  route  compares  practically  the  same  as  the  "Rock 
Island's"  route,  and  so  does  the  "Santa  Fe's"  Rio  Grande-Oregon  Short 
Line,  Portland  route. 

In  the  foregoing  we  have  contrasted  with  the  Canadian  line  eight 
of  the  American  lines.  There  are  no  disparities  in  respect  to  their 
facilities,  physical  or  other,  on  the  eastern  end, — say  east  of  the  Missouri 
River  line;  they  are  practically  equal.  On  the  western  end,  the  ex- 
tremes of  difference  are  found  to  be  American  lines  via  Seattle  against 
the  Canadian  line  via  Vancouver.  The  American  lines'  rail  haul  is  longer 
by  91  miles.  Their  Ocean  haul  is  shorter  by  27  miles.  The  American 
lines  via  Portland  against  the  Canadian  line  via  Vancouver;  the  Ameri- 
can lines'  rail  haul  is  longer  by  208  miles,  Ocean  haul  is  shorter,  by  180 
miles.  Equate  the  Ocean  haul  with  the  rail  haul  by  adding  15  per  cent 
to  the  Ocean  mileage  (which  is  stated  in  geographical  miles,  while  the 
rail  mileage  is  expressed  in  statute  miles)  and  the  extremes  of  difference 
are  found  to  be — American  lines  via  Seattle  against  the  Canadian  line 
via  Vancouver,  (27  geographical  miles)  and  the  American  line  is  longer 
by  60  miles.  The  American  lines  via  Portland  against  the  Canadian 
line  via  Vancouver  and  the  American  line  is  longer  by  one  mile. 

With  perhaps  the  single  particular  of  not  being  required  to  move  their 
traffic  through  a  foreign  country,  the  characteristics  of  these  lines  are 
practically  the  same  as  those  of  the  Canadian  line.,.  There  is  no  natural 
advantage  to  counter-balance  and  an  artificial  advantage,  a  differential, 
against  them  in  favor  of  the  Canadian  line,  as  we  have  averred,  would  be 
grossly  discriminative  and  unjust,  amounting  to  a  declaration  that  the 
right  of  an  alien  to  business  in  the  United  States  is  superior  to  the  right 
of  citizens.  With  respect  to  the  disadvantage,  if  it  would  be  a  disad- 
vantage, by  reason  of  having  to  transport  the  freight  through  a  foreign 
country,  which  you  will  find  given  in  the  Denver  discussion  as  one  of 
the  reasons  why  the  Canadian  line  claims  a  differential  and  will  also  find 
it  adverted  to  in  the  proceedings  of  the  Trans-Continental  Association,  or 
rather  given  in  those  proceedings  by  the  representative  of  the  Canadian 
line  as  one  of  the  reasons,  and  as  an  important  reason,  why  it  should  be 
given  a  differential.  With  respect  to  that  disadvantage,  if  it  is  one,  it 
will  be  sufficient  to  say  at  this  time  that  these  American  lines  which  I 
have  described  to  you,  when  working  with  the  Grand  Trunk  or  the 
Michigan  Central  Railroad  east  of  Chicago,  as  they  all  do  to  a  greater 
or  less  extent,  encounter  the  same  disadvantage. 

ARBITRATOR  DAY— Or  the  Wabash. 

MR.  STUBBS — Or  the  Wabash.  These  American  mixed  rail-and- 
water  lines  do  not  exist  merely  on  paper.  They  are  open  and  in  daily 
use  for  both  freight  and  passengers.  They  are  effectively  worked  against 
the  all-rail  lines  for  San  Francisco  trade  with  Oregon,  Washington, 


95 

i 

Idaho,  Utah  and  Montana.  Some  of  them  are  preferentially  worked  for 
San  Francisco's  trade  with  St.  Paul  and  Minneapolis  and  points  further 
east — the  Great  Northern  works  them.  It  matters  not  whether  they 
have  been  worked  more  or  less  effectively  for  the  subject  traffic.  The 
fact  that  the  Canadian  line  has  continuously,  since  1893,  been  working 
openly  on  a  lower  scale  of  rates  would  alone  be  sufficient  to  account  for 
their  deficiency  in  that  regard.  The  fact  that  they  have  elected  to  work 
upon  an  equality  as  to  rate  with  the  all-rail  lines,  regardless  of  the  re- 
sult upon  the  volume  of  tonnage  open  to  their  competition,  is  to  our 
mind,  very  strong  evidence  of  the  injustice  of  the  Canadian  line's  claim. 
If  the  Canadian  line  possesses  a  right  to  a  share,  defined  or  undefined, 
of  San  Francisco's  trade,  then  these  lines  possess  the  same  right  to  an 
equivalent  share.  If  the  Canadian  line  cannot  obtain  a  fair  share,  what- 
ever that  may  be,  of  that  traffic  at  equal  rates  with  the  all-rail  lines,  then 
these  lines  cannot  obtain  a  fair  share  at  rates  equal  to  those  charged  by 
the  all-rail  lines.  If  the  Canadian  line  by  the  use  of  the  differential  can 
obtain  traffic  which  it  otherwise  could  not  obtain,  then  a  differential 
would  force  to  these  lines,  traffic  otherwise  unobtainable.  If  the  Cana- 
dian line,  under  these  circumstances,  is  entitled  to  use  a  differential,  then 
these  American  lines  are  entitled  to  use  a  differential.  If  these  American 
lines  possessing  the  same  right,  whatever  its  origin,  whatever  its  scope, 
to  share  the  traffic  that  the  Canadian  line  possesses,  presenting  substan- 
tially the  same  physical  features  as  those  presented  by  the  Canadian  line, 
suffering  the  same  natural  disadvantages,  if  they  be  such,  when  com- 
pared with  the  all-rail  lines,  as  are  attached  to  the  Canadian  line ;  if  these 
eight  lines  voluntarily  forego  the  use  of  an  artificial  advantage  to  coun- 
ter-balance the  alleged  natural  disadvantages  and  not  only  voluntarily 
forego,  but  protest  against  its  use,  by  themselves  or  any  other  line  sim- 
ilarly circumstanced,  is  not  that  fact,  for  it  is  a  fact,  very  strong  testi- 
mony against  the  asserted  right  of  the  Canadian  line  to  share  the  traffic; 
— against  its  being  an  equitable  right,  one  that  is  equally  just  to  all  con- 
cerned under  the  circumstances  of  the  particular  case?  If  any  one  of 
them  were  standing — any  one  of  these  American  lines  that  I  have  de- 
scribed, were  standing  alone  against  the  Canadian  line  in  competition 
for  this  trade,  this  question  would  never  have  reached  the  stage  of  arbi- 
tration. It  would  never  have  been  raised.  The  Canadian  line  would 
never  have  demanded  a  differential.  Blot  out  from  the  map,  remove 
from  the  earth's  surface  this  single  line  of  railroad,  (indicating  on  map) 
the  Central  Pacific  between  Ogden  and  Sacramento,  the  pioneer  road — • 
would  any  of  these  eight  American  lines  entertain  the  proposition  which 
is  involved  in  the  Canadian  line's  contention  for  a  moment?  Does  the 
existence  of  the  Central  Pacific  Road  and  its  operation  as  a  part  of  a 
through  all-rail  line  (in  which  some  of  the  integral  parts  of  the  through 
lines  via  Portland,  which  are  part  water  and  part  rail,  are  interested),  alter 


96 

the  rights,  the  equitable  rights  of  the  Portland  mixed  lines  as  against 
the  Canadian  line  or  against  any  other  competitor? 

We  contend  that  it  does  not — that  as  a  matter  of  right,  of  equitable 
right,  as  well  as  a  matter  of  law  under  Justice  Brewer's  decision  in  the 
case  of  the  Chicago  Northwestern,  plaintiff  in  error  against  John  Osborn, 
and  the  same  plaintiff  in  error  against  A.  J.  Junod,  (S.  C.  52  Fed.  Rep. 
912),  a  through  line  is  a  line,  is  a  unit,  regardless  of  whether  part  of  it 
may  be  used  in  forming  another  through  line  even  if  it  be  a  rival  through 
line.  The  reasonableness  of  this  proposition  is  manifest.  Any  other 
view  would  deprive  certain  individual  carriers,  not  only  from  participation 
in,  but  also  of  an  opportunity  to  compete  for  a  given  traffic.  To  illustrate: 
If  the  Oregon  Short  Line  (indicating  on  map)  running  from  Huntington 
to  Granger  and  to  Salt  Lake,  were  deprived  of  a  connection  for  the  pur- 
pose of  making  a  through  line  to  San  Francisco,  via  Portland,  with  the 
Union  Pacific  at  Granger,  or  with  the  Rio  Grande  Western  at  Salt  Lake 
City,  because  those  roads  respectively  had  physical  connection  with  the 
Central  Pacific  at  Ogden,  the  Oregon  Short  Line  would  be  deprived  of  all 
opportunity  to  compete  for  a  share  of  the  San  Francisco  traffic.  Like- 
wise, if  the  Rio  Grande  Western  were  denied,  for  through  line  purposes 
a  connection  with  the  Central  Pacific  at  Ogden,  on  account  of  the  latter's 
former  connection  with  the  Union  Pacific  in  a  through  line  which  was 
ample  to  accommodate  all  the  traffic,  the  Rio  Grande  Western,  the  Den- 
ver and  Rio  Grande  and  the  Colorado  Midland  roads,  would  all  be 
thrown  out  of  competition  for  the  California  trade.  The  same  reasoning 
would  apply  to  the  Canadian  line's  connections  through  Minneapolis  and 
through  Ogdensburg.  Therefore,  it  seems  conclusive  to  us  that  all  of 
these  eight  American  lines,  part  water  and  part  rail,  are  distinct  and  sep- 
arate lines  just  as  the  Canadian  line  is  a  distinct  and  separate  line.  For 
example,  take  the  connection  through  Ogdensburg.  The  New  York 
Central  controls  the  Rome,  Watertown  &  Ogdensburg  Railroad,  the 
traffic  moves  up  out  of  New  York  over  the  New  York  Central  or  West 
Shore  and  up  over  the  Rome,  Watertown  &  Ogdensburg.  If  the  Oregon 
Short  Line  is  not  entitled  to  make  connection  with  the  Union  Pacific 
and  Rio  Grande  Western,  certainly  the  Rome,  Watertown  &  Ogdensburg 
and  the  New  York  Central  and  West  Shore  are  not  entitled  to  form  a 
connection  with  the  Canadian  Pacific.  Therefore,  as  I  stated  before,  it 
seems  conclusive  to  us  that  all  of  these  eight  American  lines,  part  water 
and  part  rail,  are  distinct  and  separate  lines,  just  as  the  Canadian  line 
is  a  distinct  and  separate  line.  They  are  as  much  so  now  as  they  would 
be  if  the  Central  Pacific  Railroad  did  not  exist.  Their  relative  rights  and 
privileges  as  against  the  Canadian  line  are  no  more  abridged  by  the  ex- 
istence of  the  Central  Pacific  Road  than  are  their  duties  as  common 
carriers  abridged  by  that  fact. 

We  repeat  that  the  issue  presented,  to  this   Board  is  between  the 


97 

Canadian  line  on  the  one  hand,  and  the  American  lines  as  a  unit,  on  the 
other.  If  the  claim  of  the  Canadian  line  fails  against  one  of  the  Ameri- 
can lines,  it  fails  against  all  of  them.  If  the  right  of  the  Canadian  line  to 
a  differential  is  not  established  as  against  the  Northern  Pacific,  this  Board 
will  not  award  it  a  differential  against  the  Northern  Pacific,  because  it 
may  be  of  the  opinion  that  its  claim  is  not  unreasonable  as  against  the  all- 
rail  line  of  the  Central  and  Union  Pacific.  To  do  so  would  be  to  add  to 
the  disabilities  of  the  Northern  Pacific,  what  is  taken  from  the  disabilities 
of  the  Canadian  line.  Will  this  Board  work  an  injustice  to  the  Northern 
Pacific  in  order  to  satisfy  a  claim  of  the  Canadian  line  against  the  Union 
and  Central  Pacific  all-rail  line,  no  matter  how  reasonable  such  claim 
may  be? 

In  May,  1888,  the  right  of  the  Northern  Pacific  to  make  by  its  mixed 
rail  and  water  line  between  Minneapolis  and  St.  Paul  and  San  Francisco 
the  same  rates  as  were  made  by  the  Canadian  line  between  the  same 
points  was  recognized  and  conceded  by  the  Canadian  line  by  vote  of  its 
representatives  at  a  meeting  of  the  Trans-Continental  Association  in  San 
Francisco,  but  it  long  ago  fell  into  disuse.  The  Northern  Pacific  found 
it  would  not  work,  for  immediately  upon  the  suggestion  of  the  proposi- 
tion the  Oregon  Railway  &  Navigation  Co.  came  in  and  wanted  the 
same  advantage.  Since  then  the  Great  Northern  has  been  completed. 
Give  the  Northern  Pacific  a  differential  and  can  you  withhold  it  from  the 
Great  Northern?  Give  it  to  the  Great  Northern  and  Northern  Pacific  and 
how  can  you  withhold  it  from  the  Oregon  Short  Line  and  Union  Pacific? 
If  you  give  it  to  them  how  can  you  withhold  it  from  the  Kansas  City 
lines?  The  Great  Northern,  Northern  Pacific,  Oregon  Railroad  & 
Navigation  Co.  in  connection  with  the  Union  Pacific,  which  means  the 
Union  Pacific,  the  "Burlington,"  the  "Rock  Island,"  the  Missouri  Pacific, 
the  Atchison,  Topeka  &  Santa  Fe,  all  in  this  market  working  a  mixed 
rail-and-water  line  on  a  differential  rate  and  where  would  rates  be?  How 
much  business  would  the  other  lines  get?  What  would  the  all-rail  lines 
do  with  the  San  Francisco  community,  who  began  with  the  use  of  the 
Cape  Horn  route,  accustomed  to  subdivide  its  business  and  to  ship  a 
large  part  by  water  around  Cape  Horn ;  accustomed  to  divide  it  between 
the  Cape  Horn  sailing  vessels  and  the  Pacific  Mail  Company  previous  to 
the  opening  of  the  overland  route;  accustomed  to  put  a  large  share  on  the 
sailing  vessels,  a  small  share  on  the  Panama  route  and  a  still  smaller 
share  on  the  overland  roads  simply  to  avail  themselves  of  differences  in 
rates?  Touch  this  question.  Introduce  differential  rates  with  any  of  the 
American  lines,  and  it  must  be  manifest  to  any  practical  railroad  man 
who  knows  the  inter-dependence  of  these  rates  and  these  lines,  that  they 
'will  operate  exactly  as  a  cut  rate.  Let  the  rate  be  cut  on  the  Great 
Northern  and  it  goes  down  to  the  Gulf  of  California.  Let  it  be  cut  on  the 
Northwestern  and  it  goes  down  to  the  Gulf  of  Mexico.  Let  it  be  cut  on 


98 

the  New  York  Central  and  it  goes  down  to  Florida.  You  cannot  stop  it. 
An  attempt  to  introduce  differentials  among  the  American  lines  will  result 
in  no  difference  at  all  in  rates.  All  rail  lines  and  the  mixed  rail-and-water 
lines  will  all  be  upon  exactly  the  same  footing. 

It  may  not  be  amiss  here,  although  I  shall  get  to  it  later,  to  call  the 
attention  of  the  Board  to  the  fact  that  there  is  a  very  small  volume  oi 
traffic  to  be  distributed  over  the  various  lines  that  can  serve  San  Fran- 
cisco. There  is  not  a  single  line  leading  out  of  San  Francisco — take  the 
Central  Pacific,  take  the  Atchison,  Topeka  &  Santa  Fe,  take  the  Oregon 
&  California  in  connection  with  the  Great  Northern,  or  the  Oregon  Rail- 
road &  Navigation  Co.,  or  the  Northern  Pacific,  or  take  the  Southern 
Pacific  line  in  connection  with  the  Texas  &  Pacific,  or  take  the  Sunset 
line  alone — any  one  of  these  lines  can  do  the  entire  traffic  and  not  tax 
the  capacity  of  a  well  regulated,  well  conducted  single-track  road,  which 
traffic  now  has  to  be  divided  with  the  Cape  Horn  sailing  vessels,  with  the 
Pacific  Mail,  with  all  these  various  railroad  lines.  We  have  no  great 
tide  of  tonnage  that  presses  upon  these  roads  here  (indicating  on  map) 
at  Chicago  and  at  St.  Louis.  At  certain  seasons  of  the  year  when  the 
capacity  of  them  all  is  taxed,  at  a  time  when  there  is  such  a  pressure  in 
the  grain  trade  that  although  the  canal-and-lake  rates  from  Chicago  are 
lower,  are  recognized  to  be  lower  sometimes  by  a  cent  a  bushel,  can  they 
not  just  as  easily  get  the  full  all-rail  rates  as  they  can  their  lower  differen- 
tial rates?  That  is  a  question  to  be  seriously  considered  when  you  talk 
about  customs  of  other  lines  as  precedents. 

In  reference  to  the  equality  of  rates  as  between  the  Northern  Pacific 
and  the  Canadian  line,  produced  by  vote  in  1888,  the  Canadian  Pacific 
concurring,  that  is  to  say,  the  Northern  Pacific  being  given  the  same 
rates  on  business  to  and  from  Minneapolis  via  its  ocean-and-rail  line  as 
the  Canadian  Pacific  enjoyed  by  its  ocean-and-rail  line :  That  action  pro- 
duced equality  at  that  time.  If  equality  of  rate  for  San  Francisco's  trade 
with  Minneapolis  and  St.  Paul  was  just  and  reasonable  then,  as  between 
the  Northern  Pacific  and  the  Canadian  line,  which  the  latter  admitted  by 
its  vote  just  referred  to,  is  it  any  less  so  now?  If  at  any  time  there  were 
just  and  reasonable  grounds  for  placing  the  Canadian  line  and  the  North- 
ern Pacific  line  on  a  rate  equality  for  San  Francisco-Minneapolis  trade, 
would  not  the  same  conditions  demand  that  the  same  equality  of  rate 
should  subsist  between  these  two  lines  for  all  San  Francisco  business 
moving  via  Minneapolis?  If  there  is  any  disadvantage  as  between  those 
two  lines  west  of  Minneapolis,  I  have  demonstrated  conclusively  that  the 
disadvantage  is  the  Northern  Pacific's  and  not  the  Canadian  Pacific's. 
I  have  also  brought  to  the  attention  of  the  Board,  and  the  Board's  own 
knowledge  supports  it — that  the  Canadian  Pacific's  and  the  Northern 
Pacific's  eastern  connections  at  Minneapolis  for  this  trade,  are  identical. 
Then,  if  the  Canadian  Pacific  concedes  that  as  for  business  between  San 


99 

I-rancisco  and  Minneapolis  equality  of  rate  is  proper  as  between  it  and 
the  Northern  Pacific,  how  can  it  say  that  equality  of  rate  is  not  proper 
between  the  Northern  Pacific  and  the  Canadian  Pacific  with  respect  to 
all  this  business  passing  through  Minneapolis  from  Atlantic  Seaboard, 
Middle,  Southern,  Western  or  Southwestern  states?  I  think  I  have  dwelt 
enough  upon  the  question  of  its  own  disability  east  of  Minneapolis. 

The  mere  purpose  in  itself  of  turning  the  traffic  from  the  domestic  to  a 
foreign  carrier  does  not  give  any  title  to  a  differential.  On  the  most 
radical  theory  favorable  to  such  title,  the  differential  can  be  allowed  as  a 
matter  of  right  and  title,  only  when  the  disability  is  real,  not  optional. 

If  the  contention  of  the  Canadian  line  is  not  established  against  the 
Northern  Pacific's  broken  line,  how  can  it  be  established  against  the 
Great  Northern's  broken  line?  As  I  have  explained,  they  have  identi- 
cally the  same  connections.  The  Great  Northern  line  is  a  little  shorter 
than  the  Northern  Pacific,  but  not  more  than  13  miles  shorter  than  the 
Canadian  Pacific.  It  connects  at  Seattle  with  the  very  same  steamers  that 
the  Canadian  Pacific  uses.  Its  line  is  broken;  subject  to  infrequent 
steamer  service,  with  consequent  delays  that  are  alleged  to  spring  from 
that,  in  same  manner  and  degree.  If  not  established  against  either  of 
the  mixed  rail-and-water  lines  via  Minneapolis  and  Seattle,  how  can  it  be 
established  against  the  mixed  lines  via  Omaha  and  Kansas  City,  respect- 
ively, via  Portland,  via  the  lines  that  we  have  described? 

We  now  pass  from  the  American  part  water  and  part  rail  lines  via 
Seattle  and  Portland,  which  work  through  Minneapolis,  Omaha  and 
Kansas  City  gateways,  to  the  consideration  of  other  American  part  water 
and  part  rail  lines,  whose  ocean  service  is  performed  on  the  Atlantic  side 
and  which  work  via  Mexican  Gulf  Ports.  Their  San  Francisco  trade  is 
confined  almost  wholly  to  that  part  of  it  which  is  done  with  the  Atlantic 
Seaboard  territory.  They  are,  therefore,  much  more  restricted  in  the 
territory  laid  open  to  their  competition  than  the  Canadian  line  is.  These 
lines,  like  the  eight  already  reviewed,  present  physical  features  which  are 
substantially  similar  to  the  characteristics  of  the  Canadian  line  and 
pleaded  by  it  in  support  of  its  contention.  If  there  is  a  difference,  it  is  of 
degree  only  and  in  degree  the  advantage  is  with  the  Canadian  line  as 
compared  with  them.  They  are  the — 

SOUTHERN  PACIFIC  "SUNSET"  LINE: 

Morgan  Steamship  Line,  New  York  to  Algiers  (New 

Orleans)  1800  miles. 

Thence  via  rail  to  San  Francisco 2489       " 

Total..  .   4280       " 


IOO 


TEXAS  &  PACIFIC  GULF  LINE: 

Cromwell  Steamship  Line,  New  York  to  New  Orleans.    1800  miles. 
Thence  via  rail  to  San  Francisco 2455 


Total 4255 


"SANTA  FE"  GULF  LINE: 

Mallory  Steamship  Line,  New7  York  to  Galveston 2300  miles. 

Thence  via  rail  to  San  Francisco.  .  2666       '" 


Total 4966 

They  all  do  San  Francisco  business  too  at  equal  rates.  They  com- 
pare with  the  Canadian  Pacific's  line  from  New  York  in  this  wise: 

The  "Sunset"  line  is  longer  by 240  miles. 

The  Texas  &  Pacific  Gulf  line  is  longer  by 206 

The  Santa  Fe  Gulf  line  is  longer  by 917 

From  the  territory  north,  northwest  and  east  of  New  York  City,  the 
difference  in  distance  favors  the  Canadian  line  still  more,  because  it  takes 
the  business  up  and  forward  directly  by  railroad,  while  we  have  to  bring 
it  down  to  New  York  and  transfer  it  to  steamer.  From  the  territory 
west,  southwest  and  south  of  New  York  City,  the  differences  are  the 
same  as  from  New  York  City,  as  the  traffic  moves  via  New  York  City, 
to  reach  any  of  the  lines  contrasted. 

Some  of  these  Gulf  lines  have  been  engaged  in  the  San  Francisco  trade 
for  a  period  which  antedates  the  opening  of  the  Canadian  line  by  sev- 
eral years,  but  they  all  work  on  the  dead-level  of  equality  as  to  rate, 
except  in  the  respects  which  have  been  already  explained.  One  of  them, 
as  least,  has  demonstrated  that  a  mixed  or  broken  line  can  successfully 
compete  with  the  all-rail  lines  for  California  business.  We  refer  to  the 
"Sunset-Gulf  line,  that  great  bug-bear  of  the  Canadian  Pacific.  The 
success  of  the  "Sunset"  line  in  competing  against  the  all-rail  lines  has 
been  remarked  by  all  who  have  been  associated  with  or  associated  in  this 
business  for  the  last  fifteen  years.  No  one  is  more  familiar  with  it  than 
Arbitrator  Midgley.  It  goes  very  far  toward  proving  that  it  is  not  wise 
always  to  accept,  as  the  product  of  knowledge  and  experience,  the  not 
uncommon  notion  that  mixed  rail-and-water  lines  cannot  successfully 
compete  at  equal  rates  with  all-rail  lines,  or  tliat  an  artificial  advantage 
in  the  shape  of  a  differential  or  other  device,  is  essential  to  participation  in 
a  common  traffic  by  the  rail-and-water  lines  as  against  all-rail  lines. 
The  success  of  the  "Sunset"  line,  and  the  fact  that  our  Canadian  friends 


TOT       : ^    :*  V::>jl  ---:  :;< 

have  been  accustomed  to  cite  it  as  a  line  against  which,  in  particular,  the 
Canadian  line  needed  a  differential,  suggests  the  pertinency  of  a  brief  his- 
torical statement. 

The  "Sunset"  line  was  opened  for  San  Francisco  traffic  in  1883.  At 
that  time  its  officers  believed  that  it  could  not  successfully  compete  at 
equal  rates  with  the  older  and  well  advertised  all-rail  lines.  Accord- 
ingly, they  undertook  to  carry  a  lower  scale  of  rates.  There  was  an  im- 
mediate and  earnest  protest  by  the  all-rail  lines.  Within  five  months, 
less  than  five  months,  the  ''Sunset"  line  was  obliged  to  adopt  the  all-rail 
schedule  for  California  business  and  has  since  continuously  maintained 
it,  except  at  certain  times  when  the  violence  of  the  all-sea  competition 
temporarily  drove  the  all-rail  lines  out  of  the  business  rather  than  involve 
their  intermediate  traffic.  To  maintain  itself,  it  improved  the  service.  I 
am  stating  nothing  now  but  what  all  those  which  are  competitors  with  the 
''Sunset"  line  know.  They  have  learned  it  by  experience.  It  brought 
ship  and  car  together,  so  that  the/  transfer  was  as  expeditious  and  as 
harmless  to  freight  as  the  all-rail  lines'  transfer  from  car  to  car.  It  built 
large  and  fast  steamships  that  reduced  the  sailing  time  between  New 
York  and  New  Orleans  nearly  one-half.  It  reduced  grades,  straightened 
its  tracks,  in  one  case  shortening  its  line  fifteen  miles  by  bridging  the 
Pecos  River  at  enormous  cost.  It  increased  the  speed  of  its  trains  and 
reduced  the  average  time  of  crossing  the  Continent.  It  abolished  over- 
charges which  had  been  the  rule.  It  promptly  adjusted  claims  for  loss 
and  damage,  previous  delays  in  which  had  been  a  standing  grievance  with 
the  California  shipper.  It  earned  the  everlasting  gratitude  of  the  Cali- 
fornia shipper,  and  has  since  been  fortunate  in  holding  a  fair  share  of  its 
patronage,  notwithstanding  that  during  certain  seasons  climatic  condi- 
tions are  unfavorable,  and  that  the  all-rail  lines  now  beat  it  by  several 
days  in  the  matter  of  time, — the  Canadian  representative  to  the  contrary 
notwithstanding, — and  are  now  and  for  several  years  have  been  equally 
prompt  and  efficient  in  their  service  in  all  respects.  There  was  no  such 
thing  as  an  overcharge  waiting  six  months  before  it  was  adjusted,  or 
a  loss  and  damage  claim  that  was  not  paid  promptly.  Its  Managers,  the 
Managers  of  the  "Sunset"  line,  seriously  doubt  if  the  line  would  have 
done  nearly  so  well  had  it  been  allowed  and  continued  to  use  a  differential. 
They  would  have  been  apt  to  have  folded  their  hands  and  trusted  to  a 
reduced  rate  to  get  the  business. 

The  other  Gulf  lines,  those  of  the  Texas  &  Pacific,  and  the  Atchison, 
Topeka  &  Santa  Fe,  respectively,  have  not  been  operated  with  the  vigor 
that  has  characterized  the  management  of  the  "Sunset"  line.  As  a  con- 
sequence, their  respective  participation  in  the  subject  traffic  has  been  in- 
considerable by  comparison  with  the  "Sunset's",  and  also  by  comparison 
with  the  more  direct  all-rail  lines.  Yet,  equality  as  to  rate  has  been  the 
rule  as  between  these  several  Gulf  lines  and  as  between  them  and  the 


102 


all-rail  lines.  They  did  not  exact  or  ask  a  differential  because  they  did 
not  get  what  they  supposed  to  be  a  fair  share  of  the  traffic. 

Lest  it  be  suggested  from  any  source,  to  the  minds  of  the  Board,  that 
the  reason  for  the  disparities  between  the  other  Gulf  lines  and  the  "Sun- 
set," in  the  volume  of  traffic  handled  by  each,  respectively,  may  be  the 
result  of  restrictions  placed  upon  the  Texas  &  Pacific  by  the  Southern 
Pacific  west  of  El  Paso,  and  west  of  Mojave  in  the  case  of  the  Atchison. 
Topeka  &  Santa  Fe,  we  submit  that  these  lines  have  been  continuously 
operated  under  contracts  with  the  Southern  Pacific  that  gave  the  same 
rights  west  of  El  Paso  and  west  of  Mojave,  respectively,  in  respect  to  rates 
and  the  movement  of  traffic,  as  have  hleen  a.ccorded  the  connections  of  the 
Southern  Pacific,  which,  with  it,  form  the  "Sunset"  line.  Under  these  con- 
tracts they  have  had  the  right,  so  far  as  the  Southern  Pacific's  consent  or 
interference  was  concerned,  to  meet,  at  will,  the  rates  charged  by  any 
other  through  line,  including  the  Canadian  line,  competing  for  the  same 
traffic,  and  the  Southern  Pacific  was  pbliged  to  share  that  rate  on  a  pro- 
rata  per  mile  basis  of  division.  If  the  Southern  Pacific  did  not,  they  had 
to  go  and  take  their  chances  before  a  Board  of  Arbitration  as  to  who 
was  right.  That  was  the  contract  between  both  the  Texas  &  Pacific  and 
the  Atchison,  Topeka  &  Santa  Fe.  Notwithstanding,  as  we  have  said, 
they  have  elected  to  maintain  equality  of  rates  with  the  "Sunset"  line,  and 
with  the  all-rail  lines.  There  must  be  some  reason  for  this.  Could  there 
be  adduced  stronger  testimony  against  the  contention  of  the  Canadian 
line  that  the  physical  characteristics  pleaded  by  it  furnish  just  grounds 
for  its  claim  to  a  differential  against  any  American  line  than  this  fact  that 
these  lines,  carrying  little  or  no  business,  comparatively  speaking,  and 
having  these  routes  that  I  have  described,  still  maintain  equality  of  rates? 
Does  it  not  illustrate  what  I  have  said  would  be  the  inevitable  result  if 
we  introduced  differentials  into  this  business? 

All  these  Gulf  lines  present  the  same  physical  characteristics  (some 
of  them  in  an  exaggerated  degree),  as  are  set  forth  as  peculiar  to  the 
Canadian  line.  Undoubtedly  they  have  equal  rights  with  the  Canadian 
line  to  have  a  share  or  a  part  of  the  traffic  set  apart  for  their  exclusive 
enjoyment.  By  contrast  the  equities  would  be  with  the  Texas  &  Pacific 
and  "Santa  Fe,"  rather  than  with  the  Canadian  line,  and  we  claim  the 
same  thing  for  the  "Sunset"  line.  Having  the  same  kind  of  a  line,  the 
same  opportunities  and  the  same  necessities  to  obtain  by  fair  means  a 
reasonable  share  of  traffic,  a  differential  in  their  favor  would  operate  to 
increase  their  respective  takings  in  like  manner  and  to  the  same  extent 
that  a  differential  in  its  favor  would  operate  to  increase  the  volume  of 
traffic  taken  by  the  Canadian  line.  Having  rights,  equal  to  the  right  of 
the  Canadian  line,  if  the  latter  is,  under  all  circumstances  entitled  to  a 
differential,  they  are  equally  entitled  to  a  differential. 

Why  is  it  that  the  Canadian  line  has  not  yet  demonstrated  the  fact  that 


103 

it  can  make  anything  like  the  time  in  delivering  to  the  east  that  the 
''Sunset  Route"  makes?  We  ask  whether  the  Canadian  line  has  ever 
tried  to  make  time  equaling  that  of  the  "Sunset."  Has  it  built  large  and 
fast  steamships  of  latest  models  to  reduce  the  time  of  the  sea-service?  Has 
it  scheduled  its  trains  with  special  regard  to  San  Francisco  service?  Has 
it  improved  the  method  of  transferring  from  ship  to  car,  so  as  to  do  it  in 
the  minimum  time,  or  has  it  continued  to  use  slow  and  antiquated  vessels 
which  serve  many  intermediate  ports  with  much  consequent  loss  of  time, 
instead  of  running  through  direct  from  Vancouver  to  San  Francisco,  or 
perfecting  its  arrangement  to  use  a  rail  connection?  Has  it  scheduled  its 
trains  first  with  regard  to  San  Francisco  business,  or  has  it  given  trie 
preference  to  its  way-traffic,  and  to  its  Oriental  trade?  It  was  opened 
more  than  ten  years  ago  and  has  since  been  continuously  operated.  Has 
it  improved  its  service?  In  that  regard,  has  it  done  anything  like  what 
the  American  lines  have  done,  and  which  was  equally  possible  to  it? 
Rather,  has  it  not  depended  wholly  upon  lower  rates  to  secure  traffic? 
Its  rail-and-water  line  is  shorter  than  the  "Sunset-Gulf"  line  by  more  than 
200  miles.  The  ocean  part  of  its  line  is  less  than  half  as  long  as  the  ocean 
part  of  the  "Sunset-Gulf"  line.  Why,  then,  in  the  name  of  all  that  is 
creditable  in  railroad  management,  has  it  not  demonstrated  that  it  can 
excel  the  "Sunset-Gulf"  line  in  despatch?  Is  it  not  reasonable  to  require 
that  the  Canadian  line  should  first  do  for  itself,  what  the  "Sunset"  line  has 
done  for  itself,  before  asking  the  American  lines  to  help  it  against  the 
"Sunset"  line?  If  the  "Sunset"  line — a  broken  line — has  demonstrated, 
by  means  which  are  as  ready  to  the  hand  of  the  Canadian  line  as  they 
were  within  the  reach  of  the  "Sunset"  line,  that  it  can  command  a  share  of 
the  San  Francisco  traffic  against  the  all-rail  lines  at  equal  rates,  is  it  not 
unreasonable  to  assume  that  the  Canadian  line  cannot  do  likewise?  If 
the  Canadian  line  will  not  first  try  the  means  employed  by  the  "Sunset" 
line,  what  measure  of  justness  and  fairness  to  the  American  lines,  or  to 
the  "Sunset"  line,  in  particular,  or  to  the  public,  which  is  deeply  inter- 
ested in  securing  efficient  and  adequate  service,  would  there  be  in  com- 
pensating the  Canadian  line  for  its  remissness?  Was  not  the  Inter-State 
Commerce  Commission  right  in  saying,  in  the  Passenger  Differential 
case  (page  9,  paragraph  3) : 

"If  the  Canadian  Pacific  fairly  can  and  fairly  ought  to  make 
substantially  the  same  time  as  is  made  by  the  American  lines,  then 
the  fact  that  it  does  elect,  at  the  present  to  use  more  time,  ought 
not  to  weigh  in  its  favor." 

Who  will  deny  the  soundness  of  this  reasoning?  Apply  it  to  the 
relative  conditions  affecting  the  ability  of  the  Canadian  line  and  the  "Sun- 
set" line,  respectively,  to  perform  equally  good  service,  to  make  equally 


1O4 

good  time  by  employment  upon  the  part  of  both  of  the  same  skill  and 
energy.  Then,  if  the  Board  please,  what  weight  should  be  given  to  the 
Canadian  line's  plea  in  this  respect  as  against  the  "Sunset"  line  or  any  of 
the  American  lines?  Should  the  shareholders  of  the  Southern  Pacific, 
or  other  roads  in  the  "Sunset"  line,  after  having  taxed  themselves  heavily 
to  faring  the  "Sunset"  service  to  the  maximum  of  efficiency,  on  that  ac- 
count be  subjected  to  another  tax,  an  assessment  which  requires  them  to 
surrender  a  portion  of  their  business  to  the  Canadian  line?  The  Inter- 
State  Commission  justly  says:  "A  differential  is  but  a  device  to  partition 
traffic."  To  suffer  the  Canadian  line  to  use  a  differential  against  the 
''Sunset,"  is  to  turn  traffic  from  the  "Sunset"  line  to  the  Canadian  line.  It 
is  taxing  the  "Sunset"  line  for  the  benefit  of  the  Canadian  line.  The 
builders  of  the  Southern  Pacific  received  no  governmental  or  other  aid,- 
but  a  land-grant  of  doubtful  value,  by  which  I  mean  that  much  of  it  has 
been  forfeited  to  the  Government  and  there  is  doubt  as  to  much  that  re- 
mains. The  testimony  of  Sir  Wm.  C.  Van  Home,  President  of  the 
Canadian  Pacific  Railway,  before  the  Senate  Committee  on  Inter-State 
Commerce,  shows  that  the  value  of  the  various  aids  received  by  the 
Canadian  line  from  the  Dominion  Government  was  $35,000,000.00  in 
money,  18,000,000  acres  of  land,  valued  at  $3.50  per  acre,  and  714  miles 
of  road,  which  cost  $35,000,000.00.  Sir  Wm.  C.  Van  Home  acknowl- 
edges that  for  some  of  their  land  they  received  $3.50  per  acre,  and  a 
statement  that  I  saw  (and  which  I  cannot  prove  is  from  any  authentic 
source,  though  it  is  said  to  have  been  compiled  from  official  records), 
shows  that  the  Canadian  line  sold  their  land,  what  has  been  sold,  at  prices 
ranging  from  $3.00  to  $6.00  per  acre.  This  testimony  I  refer  to  is  in 
Report  No.  847,  5ist  Congress,  ist  Session,  which  I  will  file  as  one  of  the 
Exhibits. 

The  Southern  Pacific  shareholders  have  never  received  a  dollar  in 
dividends.  The  shareholders  of  the  Canadian  line  were  guaranteed  and 
received  for  ten  years,  an  annual  dividend  of  three  per  cent.  Manifestly, 
our  poor  Canadian  friends  ought  to  be  further  assisted;  but  ought  they 
not  to  put  their  petition  upon  more  substantial  and  creditable  grounds? 

ARBITRATOR  DAY— You  stated  a  moment  ago  that  there  was  an 
annual  dividend  of  three  per  cent  guaranteed.  By  whom  was  it  guaran- 
teed? 

MR.  STUBBS — It  was  guaranteed  by  the  Government.  I  was  under 
the  impression  it  was  a  subsidy  by  the  Government,  but  I  find  that  the 
testimony  of  Sir  Wm.  C.  Van  Home  is  to  the  effect  that  the  money  was 
deposited  by  the  Company  with  the  Government  to  provide  for  that  divi- 
dend, but  I  did  not  go  deep  enough  into  it  to  be  certain  as  to  that.  I  did 
not  think  it  was  Very  important. 

There  have  been  filed  with  you  the  proceedings  of  the  Trans-Con- 
tinental Association,  and  of  the  Denver  Meeting  and  various  other  docti- 


105 

ments,  and  if  you  examine  those,  you  will  find,  as  I  have  previously  stated, 
that  among  the  reasons  urged  why  the  Canadian  line  should  have  this 
differential,  is  the  fact  that  they  transported  their  goods  through  a  foreign 
country  under  customs  regulations.  If  the  gentleman  of  the  Canadian 
Pacific  who  presented  its  case  here  alluded  to  that,  I  did  not  hear  it, 
but  anticipating  it,  and  knowing  that  the  Board  will  find  it  in  the  record, 
1  am  persuaded  to  answer  that  point. 

In  respect  to  the  annoyances  and  delays  arising  from  customs  regU' 
lations  incident  to  moving  domestic  traffic  through  a  foreign  country  and 
alleged  by  the  Canadian  line  as  prejudicial  to  it,  we  submit  that  they  are 
largely  imaginary,  and  the  shipper  is  relieved  by  the  carrier  to  such  an 
extent  that  the  alleged  disadvantage  is  unimportant.  Section  3006,  of  the 
Revised  Statutes  of  the  United  States,  confers  the  privilege  of  transporta- 
tion through  adjacent  foreign  territory  of  the  products  and  manufactures 
of  the  United  States  from  one  port  or  place  in  the  United  States,  to  an- 
other port  or  place  in  the  United  States,  under  such  rules  as  the  Secretary 
of  the  Treasury  may  prescribe.  This  is  the  way  it  is  done:  When  mer- 
chandise is  offered  for  transportation  from  San  Francisco  to  other  places 
in  the  United  States,  via  Canadian  Pacific  Railway,  delivery  is  made  to 
the  Pacific  Coast  Steamship  Company.  A  shipper's  part  manifest  ("Ex- 
hibit H")  is  presented  at  the  Custom  House  by  the  shipper,  or  his  agent, 
and  duly  sworn  to.  From  this  is  made  the  special  coastwise  manifest 
("Exhibit  I"),  and  Shipper's  manifest  ("Exhibit  J").  Certified  copies  of 
these  are  forwarded  to  Vancouver  and  to  the  port  of  re-entry  into  the 
United  States.  These  three  forms  of  manifest  are  the  only  customs  papers 
required,  and  they  are  made  out  by  the  brokers  employed  by  the  Cana- 
dian Pacific  Railway  without  charge  to  the  shippers.  When  the  steamer 
arrives  in  Vancouver,  the  merchandise  is  transferred  to  the  cars  under 
supervision  of  a  United  States  Inspector,  who  fastens  the  cars  with  United 
States  Government  locks  and  seals.  This  Inspector,  detailed  from  the 
district  of  Puget  Sound,  is  paid  $3.50  per  day,  the  United  States  being 
re-imbursed  by  the  Canadian  Pacific  Railway.  At  the  frontier  (Morris- 
town,  N.  Y.,  or  Portal,  No.  Dak.),  the  manifest  accompanying  the  car 
is  compared  with  that  in  the  hands  of  the  Inspector,  and  with  the  con- 
tents of  the  car,  and  if  found  to  agree,  the  fastenings  are  removed,  and 
the  cars  are  thereafter  free  of  customs  control.  No  fees  are  paid.  The 
brokers  charges  or  salary,  and  the  per  diem  of  the  Inspector  are  the  onl\ 
expenses,  and  these  the  shipper  has  nothing  to  do  with.  In  the  move- 
ment, westbound,  similar  papers  are  prepared  and  presented  at  Morris- 
town,  N.  Y.,  and  Portal,  No.  Dak.,  the  cars  proceeding  under  lock  and 
seal  to  Vancouver,  where  the  lading  upon  steamer  is  supervised  by  the 
Inspector  stationed  there. 

We  contend  that  the  deterrent  effect  of  the  necessary  custom  regula- 
tions upon  the  otherwise  natural  movement  of  traffic  is  immaterial.  The 


io6 

American  lines  suffer  it  in  like  manner  and  degree  when  working  a:> 
they  do  in  connection  with  the  Grand  Trunk  and  Michigan  Central,  both 
of  which  lines  have  agents  resident  in  San  Francisco,  actively  competing 
for  Trans-Continental  traffic.  The  Michigan  Central  moves  its  great 
traffic  between  Chicago  and  Buffalo  and  points  farther  east  or  west  under 
like  customs  regulations,  in  keen  competition  with  the  "Lake  Shore"  and 
"Pennsylvania"  lines,  which  are  free  from  such  regulations,  yet  the  Michi- 
gan Central  makes  no  claim  of  disability  on  that  account,  and  neither 
receives  nor  asks  any  compensating  advantages  in  rates. 

Whereupon  an  adjournment  was  taken  to  10  o'clock  A.  M.,  October 
14,  1898. 


Morning  Session,  October  14,  1898,  10  A.  M. 
The  meeting  convened  pursuant  to  adjournment. 

ARBITRATOR  WASHBURN— Mr.  Stubbs,  will  you  proceed  with 
your  argument? 

MR.  STUBBS — Mr.  Chairman,  and  Gentlemen,  Members  of  the 
Board:  I  wish,  first,  to  revert  to  an  acknowledgment  on  the  part  of  the 
Canadian  Pacific  that  their  contention  is  for  a  differential  under  the  rates 
of  all  the  American  lines.  In  answer  to  a  question  by  Arbitrator  Day, 
at  the  morning  session  yesterday,  the  Canadian  Pacific  representative 
answered,  "No,  our  contention  is  that  whatever  the  agreed  rates  of  the 
Trans-Continental  lines  may  be,  that  we  shall  be  permitted  to  charge  a 
differential  rate  below  those  rates." 

In  answer  to  a  question  from  Arbitrator  Day:  "Do  you  regard  that 
you  are  entitled  to  charge  a  lower  rate  on  California  traffic  than  is 
charged  by  the  Northern  Pacific  on  California  traffic?"  The  reply  was, 
"No,  if  they  use  the  water  lines.  We  are  on  record  over  and  over  again, 
that  in  the  case  of  the  Northern  Pacific  and  Great  Northern,  that  where- 
ever  they  use  the  steamer  line  from  Puget  Sound  to  San  Francisco,  they 
shall  have  the  differential,  if  they  want  it.  But  they  are  out  of  San  Fran- 
cisco business;  they  do  not  claim  to  be  San  Francisco  lines;  they  do 
not  work  for  San  Francisco  business.  In  other  words,  they  have  made  a 
trade." 


TO; 

He  who  affirms  must  prove.  There  is  no  trade;  there  never  has  been 
a  trade  between  the  Northern  Pacific  and  the  Great  Northern  on  the  one 
side,  and  the  other  San  Francisco  lines  on  the  other  side.  They  do  work 
for  San  Francisco  business.  The  Northern  Pacific  is  in  the  trade  and 
I  may  say  daily  takes  business  to  and  from  San  Francisco,  using,  however, 
for  the  most  part,  its  all-rail  line.  The  Great  Northern  takes  business  for 
San  Francisco  in  connection  with  its  ocean  line  from  Seattle.  It  matters 
not  how  much  they  take,  they  are  in  it.  But,  assuming  that  all  that  is 
said  by  the  Canadian  line  is  true,  how  does  it  bear  on  this  case  further 
than  to  accentuate  the  position  of  the  American  lines,  if,  for  any  reason, 
the  Great  Northern  and  the  Northern  Pacific  other  than  a  trade,  find  that 
it  is  to  their  interest — and  their  interests  are  involved  with  the  interests  of 
the  other  lines — not  to  use  a  differential,  because  of  consequences,  the 
inevitable  consequences  to  traffic  as  a  whole, — what  does  that  argue  as 
against  the  claim  of  the  Canadian  line  for  a  differential? 

Reverting  to  what  was  said  yesterday,  as  indicating  the  reason  why 
a  differential  had  not  been  used  in  favor  of  the  so-called  weaker  Cal- 
ifornia lines,  let  me  repeat  that  I  am  talking  to  experts  in  the  transporta- 
tion business.  Put  a  differential  of  10  per  cent  on  the  Canadian  line; 
put  it  upon  the  Great  Northern  line;  put  it  upon  the  Northern  Pacific 
line,  and  I  assert  that  you  cannot  refrain  from  putting  it  upon  the  Oregon 
Railroad  &  Navigation  Co.  and  Oregon  Short  Line.  The  Kansas  City 
gateway,  the  Omaha  gateway  and  the  Minneapolis  gateway  must  be  upon 
an  equality  with  respect  to  this  business.  No  one  would  stand  it.  No 
line  would  stand  any  disparity  between  those  gateways,  and,  especially 
is  it  reasonable,  because  all  of  these  lines  have  like  physical  disabilities. 
Allow  these  lines,  the  Canadian  Pacific,  the  Great  Northern,  the  Northern 
Pacific,  the  Oregon  Railroad  &  Navigation  Co.  with  its  Union  Pacific, 
the  "Burlington,"  the  "Rio  Grande,"  the  Missouri  Pacific  and  the  "Rock 
Island"  connections,  to  enter  this  territory  with,  a  10  per  cent  differential 
and  what  would  be  left  for  the  line,  the  direct  all-rail  line  via  Ogden? 
Where  would  the  "Santa  Fe"  be?  Where  would  the  Texas  &  Pacific 
be?  Where  would  this  much  vaunted  "Sunset  Route"  be?  Is  it  not 
apparent  to  every  practical  man  that  there  would  be  no  differential;  that 
there  could  be  no  differential;  that  dead  level  of  equality  of  rates  would 
necessarily  subsist?  The  only  difference  would  be  that  instead  of  being 
upon  a  basis  of  reasonable  rates,  something  that  would  afford  reasonable 
compensation  to  the  carrier  and  would  contribute  to  the  maintenance  and 
stability  of  reasonable  rates,  we  would  all  be  down  to  the  fighting  basis, 
at  cost,  with  no  stability  whatever  to  the  rates.  There  would  be  open  war 
until  some  one  or  more  of  the  lines  was  exhausted,  until  stock-holders, 
and  security-holders  stepped  in  and  said — "Stop!"  We  would  come  out 
at  the  same  hole  we  wrent  in  at  just  as  in  the  case  of  the  great  fight  be- 


io8 

tween  the  "Atchison"  and  the  other  lines  in  1886— dead  level  of  equality 
of  rates. 

Reverting  again  to  the  comparison  between  the  "Sunset  Route"  and 
the  Canadian  line:  the  "Sunset  Route"  competes  in  this  New  England 
territory,  the  great  manufacturing  center  for  cotton  piece  goods,  do- 
mestics, boots  and  shoes,  nails  and  many  other  commodities  with  which 
you  are  all  familiar.  It  competes  with  the  all-rail  lines  on  a  dead  level 
equality  of  rates.  The  Canadian  line  takes  up  goods  at  Boston,  or  at  any 
of  these  New  England  points  or  any  of  the  interior  New  York  points,  in 
cars;  transports  them  without  breaking  bulk  to  Vancouver,  transfers 
them  from  car  to  ship  and  delivers  them  at  San  Francisco.  The  "Sunset" 
line  and  all  the  Gulf  lines  take  these  goods  from  Boston,  as  a  rule,  and  put 
them  aboard  of  the  steamers  of  the  Metropolitan  Steamship  Company; 
they  are  delivered  by  that  company  on  their  pier,  in  New  York  City; 
they  are  then  lightered  to  the  Mallory  Steamship  pier  or  to  the  Morgan 
Steamship  pier,  reloaded  into  the  vessels  of  the  Gulf  lines,  transported  to 
New  Orleans  or  to  Galveston,  then  transferred  from  vessel  to  car,  and 
carried  to  San  Francisco.  There  is  evidently  a  disparity  between  the 
ability  to  handle  those  goods;  but  in  whose  favor  is  that  disparity?  Is 
it  the  Canadian  line? 

I  feel  obliged  to  refer  to  a  reference,  or  a  statement  made  by  the 
Canadian  line,  which  I  am  sorry  to  have  to  notice.  It  seems  to  me  it  is 
beneath  the  dignity  of  this  proceeding.  I  cannot  see  what  the  cutting 
of  rates,  or  the  maintenance  of  rates,  between  these  lines  currently,  has 
to  do  with  this  proceeding.  But  it  was  deemed  to  be  necessary 
by  the  Canadian  people  to  refer  to  the  "Sunset"  line  invidiously,  I  think, 
in  order  to  account  for  the  share  of  the  traffic  which  it  takes,  which  has 
nothing  whatever  to  do  with  this  controversy  according  to  our  construc- 
tion of  the  submission.  The  advocate  of  the  Canadian  line  says: 

"Now,  in  connection  with  accumulating  business  by  the  Sun- 
set line,  their  water  line  being  the  initial,  it  is  well  known  that 
steamer  lines  in  securing  business  are  not  at  all  particular  as  to 
classification  or  weight.  That  is  the  history  of  the  manner  in 
which  the  steamer  lines  carry  on  their  business  usually  and  ship- 
pers often  think  they  see  an  advantage  in  using  the  water  lines 
as  against  all-rail,  in  order  to  evade  the  classification  and  weight  as 
much  as  possible." 

Out  of  the  abundance  of  the  heart  the  mouth  speaketh ;  but  Brother 
Kerr  forgot  that  on  eastbound  business  his  steamer  line  is  the  initial  line. 
I  have  at  hand  a  ready  illustration  of  evasion  of  classification  upon  the 
part  of  the  Canadian  line,  but  I  do  not  think  it  is  fitting  to  introduce  it 
"here.  He  proceeds: 


109 

''It  is  also  well  known  that  the  Southern  Pacific  Co.  are  pretty 
well  hedged  around  in  California  and  in  large  sections  of  the 
state  they  enjoy  a  monopoly.  This  is  particularly  so  with  regard 
to  San  Francisco,  as  all  lines  entering  the  city,  with  the  exception 
of  the  Canadian  Pacific  and  the  Oregon  Railroad  &  Navigation 
Co.  must  use  the  Southern  Pacific  tracks.  Being  in  this  position, 
they  are  enabled  to  influence  business  in  various  ways  to  the 
Sunset  line,  in  which  they  have  been  very  successful."  (Thank 
him  for  that) — ''Merchants  are  naturally  chary  of  unnecessarily 
antagonizing  a  railroad  company  who  has  control  of  their  busi- 
ness, and  on  the  other  hand,  the  Southern  Pacific  are  in  a  posi- 
tion to  offer  various  local  inducements  to  merchants,  thereby  tying 
their  business  to  the  Sunset  line.  This  is  one  of  the  chief  reasons 
why  the  Sunset  line  has  been  enabled  to  hold  such  a  large  share 
of  Trans-Continental  business  and  proves  that  their  circumstances 
are  so  entirely  different  from  the  Canadian  Pacific  that  they  are 
npt  entitled  to  differential  rates  as  against  all-rail  lines." 

I  am  not  going  to  take  the  time  of  the  Board  in  disputing  such  propo- 
sitions, but  for  the  sake  of  argument,  suppose  we  admit  that  it  is  true — 
it  is  not  true — but  suppose  that  we  admit  it  is  true,  that  the  Southern 
Pacific  has  a  monopoly  in  California;  that  it  has  a  tremendous  leverage 
by  reason  of  having  hedged  California  in.  By  lease  and  by  ownership 
the  Southern  Pacific  controls  about  3,000  miles  of  railroad  in  the  State 
of  California.  Not  all  of  them,  but  nearly  all  of  those  many  miles  of  rail- 
road have  been  built  by  the  Southern  Pacific  Company, — by  the  men 
who  control  the  Southern  Pacific  Company.  In  nearly  every  case  in 
constructing  these  roads  they  crossed  virgin  soil  tenanted  only  by  the 
coyote  and  jack  rabbit;  they  opened  those  valleys;  they  discounted  the 
future  by  many  years;  they  made  this  business.  Shall  they  give  it  up  to 
the  Canadian  line?  Let  them  go  down  into  Missouri  with  that  same  sort 
of  an  argument. 

Now,  again,  returning  to  the  question  of  the  advantage  to  be  derived 
by  these  Gulf  lines,  the  "Sunset"  line  in  particular,  by  under-classifica- 
tion  of  freight.  From  October,  1889,  to  January  first,  1892,  there  was  an 
inspection  service  at  San  Francisco  over  all  the  roads  of  all  the  Trans- 
Continental  lines  controlled  by  the  Association,  the  inspectors  were  ap- 
pointed by  the  Chairman  of  the  Association,  their  salaries  paid  by  the 
Association,  they  acted  in  complete  subordination  and  under  the  entire, 
sole  direction  of  the  officers  of  the  Association.  From  April  first,  1893, 
to  April  3Oth,  1897,  under  the  Trans-Continental  Freight  Rate  Commit- 
tee, this  system  of  inspection  was  employed  for  all  the  lines  except  the 
Canadian  Pacific,  Northern  Pacific  and  Great  Northern.  From  June  first, 
^897,  to  date,  the  Trans-Continental  Freight  Bureau  has  directed  and 


no 

controlled  inspection  for  all  the  lines  except  the  Canadian  Pacific.  De- 
cember 1 5th,  1897,  less  than  a  year  ago,  the  Canadian  Pacific  was  brought 
into  the  inspection.  I  do  not  think  that  has  anything  to  do  with  this 
case,  notwithstanding. 

Resuming  the  argument  where  it  was  left  yesterday,  we  ask  what 
answer  can  be  made  to  our  showing  in  behalf  of  the  American  broken 
lines?  Is  it  that  they  have  alternative  all-rail  lines?  There  must  be  some 
answer  to  that  question.  Is  it  that  they  have  alternative  all-rail  lines, 
that  they  elect  to  use  them  and  thereby  some  of  them  are  enabled  to 
carry  a  share  of  the  traffic  with  which  they  ought  to  be  satisfied?  To 
that  supposititious  question,  our  answer  has  been  fore-shadowed  in  part. 
It  is  that  these  American  part  water  and  part  rail  lines  are  through  lines, 
de  facto  and  de  jure,  open  to  the  public  use  for  transportation  of  freight 
between  San  Francisco  and  places  on  and  east  of  the  Missouri  River  line, 
as  the  Canadian  line  is  open  to  such  use;  that  they  present  physical 
characteristics  differing  so  little  from  those  presented  by  the  Canadian 
line  that  they  are  equally  available  with  that  line;  that  their  respective 
capacities  to  do  that  business  are  equal  to  those  of  the  Canadian  line; 
that  the  obligations  of  their  respective  Managers  to  secure  all  the  business 
tributary  to  them  or  that  can  be  made  so  at  remunerative  rates  under 
reasonable  conditions,  are  quite  as  binding  as  the  similar  obligations  of 
the  Managers  of  the  Canadian  line;  that  their  respective  obligations  to 
connections  and  to  their  competitors  are  neither  greater  nor  less  than 
the  obligations  of  the  Canadian  line  to  its  connections  and  to  its  com- 
petitors ;  that  their  respective  rights  to  share  the  San  Francisco  carrying 
trade  are  equal  to  and  as  sacred  and  inviolable  as  the  right  of  the  Cana- 
dian line;  that  each  of  these  lines  is  a  unit  for  this  comparison  with  the 
Canadian  line  as  in  like  manner  and  degree  the  Canadian  line  is  a  unit 
for  comparison  with  the  American  lines;  that  they  cannot  be 
divided  into  their  integral  parts,  their  several  constituent  roads, 
without  destroying  the  line,  just  as  the  Canadian  line  can- 
not be  divided  into  its  integral  parts,  its  several  constituent 
roads  without  its  destruction  as  a  line.  To  say,  that  because  the 
Union  Pacific  road  is  a  part  of  an  all-rail  line  between  New  York  and 
San  Francisco,  or  between  Chicago  and  San  Francisco,  that  it  cannot 
also  be  part  of  an  independent  part  water  and  part  rail  line,  New  York 
or  Chicago  to  San  Francisco,  is  equivalent  to  saying,  that  because  the 
New  York  Central  or  the  "West  Shore"  is  part  of  an  all-rail  line,  New 
York  to  San  Francisco,  it  cannot  be  part  of  a  mixed  water  and  rail  line 
between  New  York  and  San  Francisco,  of  which  the  Canadian  Pacific 
is  also  a  part;  or  that  because  the  Chicago  &  Northwestern,  or  the  Chi- 
cago, Milwaukee  &  St.  Paul  road,  is  part  of  a  through  all-rail  line,  Chi- 
cago to  San  Francisco,  it  shall  not  be  a  part  of  a  mixed  water  and  rail 
line  between  the  same  points,  of  which  the  Canadian  Pacific  is  also  a  part. 


I J 1 

If  this  is  sound  reasoning,  as  we  believe  it  to  be,  it  necessarily  follows 
that  because  one  of  the  constituent  roads  in  a  mixed  line  via  Portland,  or 
via  Seattle,  or  via  the  Gulf  of  Mexico,  is  also  a  part  of  an  all-rail  line,  the 
latter  being  a  competitor  of  the  former  line  for  San  Francisco  business, 
and  \\Jiich  carries  a  more  or  less  considerable  share  of  that  business,  that 
fact  ca  mot  be  fairly  used  against  the  right  of  the  mixed  water  and  rail 
line  as  a  unit  to  participate  fairly  in  the  subject  traffic  as  against  the  all- 
rail  line  as  a  unit.  This  is  obvious.  Otherwise  those  parts  of  the  mixed 
lines  which  were  not  also  parts  of  all-rail  lines  would  be  completely  cut 
off  from  any  participation  in  the  business.  For  example:  Between 
Chicago  and  Atlantic  Coast  cities,  the  Baltimore  &  Ohio  Railroad  is  a 
recognized  standard  all-rail  line  over  which  the  standard  rates  prevail. 
It  is  also  part  of  a  rail-and-ocean  line,  and  of  a  rail-and-lake  line,  respect- 
ively, over  which  differential  rates  are  applied  in  competition  with  its  own 
all-rail  line. 

Again;  who  is  to  decide  for  these  several  American  lines  what  is  or 
what  should  be  a  satisfactory  share  of  the  San  Francisco  traffic?  Cer- 
tainly not  the  Canadian  Pacific.  If  the  Canadian  line  is  entitled  to  an 
undefined  share  of  the  traffic,  which  is  equivalent  to  an  unlimited  share, 
then  is  there  any  limitation  to  be  placed  upon  the  shares  of  the  several 
American  lines,  whether  they  be  all-rail,  or  mixed  rail-and-water  lines? 
The  claim  of  the  Canadian  Pacific  is  made  because  of  its  so-called  broken 
line.  All  of  its  alleged  disabilities  which  were  dwelt  upon  by  our  adver- 
sary arise  from  its  use  of  this  broken  line.  Why  does  it  not  use  the  all-rail 
line?  In  that  case  these  troubles  would  disappear  in  a  moment.  If  it 
elects  to  use  a  mixed  water-and-rail  line,  can  it  be  doubted  it  finds  an 
advantage  in  so  doing?  Must  we  then  as  a  matter  of  right  super-add  a 
money  advantage?  The  Canadian  Pacific  has  an  all-rail  line  over  which 
to  work  to  and  from  San  Francisco,  just  as  it  works  between  Minneapolis 
and  Chicago  and  Cleveland,  Ohio,  and  Tullahoma,  Tenn.,  and  Helena, 
Ark.,  over  various  connecting  railroads.  It  uses  its  all-rail  line  as  far  as 
Portland,  Ore.,  and  from  Portland  to  San  Francisco  there  are  open  to 
its  use  the  identical  railroad  facilities  that  are  open  to  and  used  by  the 
Northern  Pacific  upon  the  same  terms.  In  that  event,  as  we  have  said,  if 
the  Canadian  line  elects  to  use  its  ocean  line  instead  of  its  rail  line,  is  it 
entitled  to  any  consideration  in  the  way  of  a  differential  or  other  device 
to  maintain,  or  counter-balance,  rather,  the  alleged  disadvantages  it  is 
under  by  working  its  ocean  rather  than  its  rail  lines?  On  the  contrary 
is  it  not  manifest  that  there  is  an  advantage,  a  real  tangible  advantage, 
resulting  to  the  Canadian  line  by  using  the  ocean  line  against  the  rail 
line?  If  there  was  not  such  an  advantage,  would  it  prefer  the  ocean  over 
the  rail  line?  As  a  matter  of  fact,  we  know  that  it  uses  the  ocean  part  of 
its  line  from  Vancouver  instead  of  the  rail  line  from  Sumas,  because  there 
is  an  advantage  in  it. 


112 

Now,  on  the  other  hand,  if  the  Northern  Pacific  elects  to  use  the 
all-rail  line  from  Portland  against  the  ocean  line  trom  Seattle,  or  from 
Portland,  the  same  choice  being  open  to  the  Canadian  line,  does  it  by  so 
doing  give  the  Canadian  line  just  grounds  for  demanding  a  differential 
against  it  or  for  saying  that  it  ought  to  be  satisfied  with  what  it  gets 
because  it  uses  an  all-rail  line? 

Again:  The  Canadian  line  works  for  the  North  Pacific  Coast  business; 
the  business  of  Seattle,  Tacoma  and  of  Portland — with  all  this  blue  line 
territory  (indicating  on  map),  upon  a  strict  equality  of  rates  with  the 
Great  Northern,  the  Northern  Pacific,  the  Oregon  Railroad  &  Navigation 
Company,  and  the  Oregon  Short  Line. 

Permit  some  repetition  as  we  wish  this  point  to  be  understood :  From 
and  to  each  point  in  all  of  this  blue  line  territory  east  of  the  Missouri 
River  line,  the  Canadian  Pacific,  the  Great  Northern  line  and  the  North- 
ern Pacific  line,  the  Omaha  lines  and  the  Kansas  City  lines,  respectively, 
via  Granger  and  Pocatello,  and  via  Ogden  and  Pocatello,  work  Portland 
business  upon  a  strict  equality  of  rates.  This  recognizes  and  establishes 
equality  of  rates  as  a  principle  between  these  interested  lines  for  the  rail 
service  east  of  Portland. 

Now,  then,  as  we  have  shown  that  the  identical  roads  and  facilities 
between  Portland  and  San  Francisco  are  alike  open  upon  equal  terms 
to  all  the  roads  terminating  on  the  North  Pacific  Coast;  to  the  Great 
Northern,  the  Northern  Pacific,  the  Oregon  Railroad  &  Navigation  Com- 
pany, the  Oregon  Short  Line  and  the  Canadian  Pacific,  respectively,  as 
part  of  their  respective  through  all-rail  lines  to  and  from  San  Francisco, 
is  it  not  manifest  that  they  are  upon  the  same  equality  with  respect  to 
San  Francisco  business,  as  subsists  between  them  in  respect  to  Port- 
land business?  If  equality  of  rate  is  the  rule  with  all  these  lines  between 
eastern  points  and  Portland,  why  should  not  equality  of  rate  be  the  rule 
between  them  in  respect  to  San  Francisco  business,  the  conditions  and 
facilities  south  of  Portland  being  identical  for  them  all? 

It  may  be  that  the  Canadian  line  will  give  as  a  reason  for  not  using 
the  all-rail  line,  that  the  Northern  Pacific  between  Seattle  and  Portland 
is  not  open  to  its  use  for  San  Francisco  business  upon  reasonable  terms, 
or  upon  terms  which  it  can  afford  to  pay. — It  pays  the  terms  from  all 
these  points  in  this  country  (indicating  on  map)  up  to  Minneapolis — 
local  rates — But  we  ask  in  reply,  why  this  reason  does  not  apply  to  Port- 
land business  as  well  as  to  San  Francisco  business?  I  do  not  know  that 
they  make  much  use  of  that  line,  but  it  is  open  to  their  use  and  they  main- 
tain equality  of  rates.  The  Canadian  Pacific  line  does  use  the  Northern 
Pacific  connection  for  Portland  business,  and  does  work  upon  an  equality 
of  rate  with  all  the  North  Pacific  Coast  lines  for  Portland  business. 
Whether  it  does  or  not,  is  of  little  moment.  It  is  upon  an  exact  equality 
with  these  lines  south  of  Portland.  Then  why  should  it  not  work  with 


them  upon  an  exact  equality  as  to  rate  for  San  Francisco  business?  I 
ask,  in  the  second  place,  whether  the  Canadian  Pacific  has  ever  ap- 
proached the  Northern  Pacific  with  a  proposition  to  use  its  line  between 
Seattle  and  Portland  for  business  which  San  Francisco  interchanges  with 
all  these  eastern  points,  coupled  with  the  withdrawal  of  its  demand  for  a 
differential  advantage  on  that  business.  We  are  informed  and  believe 
that  it  has  never  done  so.  But  whether  this  is  true  or  untrue,  we  revert 
to  the  fact  that  it  has  established  equality  of  rate  basis  to  Portland  for 
Portland  business,  which  point  it  cannot  reach  all-rail  except  by  using 
the  Northern  Pacific's  road  from  Seattle.  Then  why  should  it  not  work 
upon  the  same  equality  of  rate  basis  for  San  Francisco  business  over  the 
line  which  the  Northern  Pacific  uses  between  Portland  and  San  Francisco 
and  which  is  open  to  the  use  of  the  Canadian  Pacific  upon  the  same 
terms?  We  submit  a  comparison  of  the  all-rail  lines  referred  to — of 
the  Canadian  line,  the  Great  Northern,  and  the  Northern  Pacific: 

At  Sumas  (the  International  boundary  line)  the  Canadian  line  con- 
nects with  the  Seattle  &  International  Railroad  for  Seattle  (125  miles). 

ARBITRATOR  WASHBURN— Is  that  road  controlled  by  any 
other  road? 

MR.   STUBBS— No  sir. 

ARBITRATOR  WASHBURN— It  is  an  independent  road? 

MR.  STUBBS — I  understand  it  is  an  independent  line  and  that  the 
Canadian  Pacific, — you  will  find  when  you  refer  to  the  Denver  proceed- 
ings, that  Mr.  Kerr  there  says  that  the  Canadian  Pacific  has  a  traffic 
arrangement  with  the  Seattle  &  International  road. 

At  Seattle,  the  latter  connects  with  the  Northern  Pacific  for  Portland 
(185  miles). 

At  Spokane,  the  Great  Northern  connects  with  the  rails  of  the  Oregon 
Railroad  &  Navigation  Company  for  Portland  (449  miles). 

At  Portland,  both  the  Northern  Pacific  and  the  Oregon  Railroad  & 
Navigation  Company  connect  with  the  Oregon  &  California  Railroad  for 
San  Francisco  (772  miles). 

The  business  interchanged  by  San  Francisco  with  New  England  and 
the  Eastern  Middle  States,  New  York,  Pennsylvania,  etc.,  is  fairly  repre- 
sented by  the  cities  of  Portland,  Me.,  Boston,  Mass.,  New  York  City, 
Philadelphia  and  Baltimore.  The  distance  between  San  Francisco  and 
the  several  eastern  cities  over  the  all-rail  line  described,  will  be  found 
fully  stated  in  "Exhibit  N".  According  to  this  Exhibit  the  Canadian 
Pacific  has  all-rail  lines  to  San  Francisco,  as  follows : 

From  Portland,  Me.,  it  is  equal  in  length  with  the  Great  Northern 
and  125  miles  shorter  than  the  Northern  Pacific. 

From  Boston  it  is  55  miles  longer  than  the  Great  Northern  and  62 
miles  shorter  than  the  Northern  Pacific. 


From  New  York  City  its  line  is  longer  than  the  Great  Northern  and 
Northern  Pacific  by  163  miles  and  46  miles,  respectively. 

From  Philadelphia  its  line  is  229  miles  longer  than  the  Northern 
Pacific  line  and  346  miles  longer  than  the  Great  Northern's  line,  but 
this  difference  would  be  greatly  reduced  by  the  use  of  its  line  via 
Minneapolis. 

From  Baltimore  its  line  is  385  miles  longer  than  the  Northern 
Pacific's  line  and  482  miles  longer  than  the  Great  Northern's  line. 

These  differences  where  they  show  against  the  Canadian  line,  would 
almost  disappear  if  it  would  use  its  Minneapolis  and  "Soo"  line  route, 
using  the  identical  connections  for  the  business  that  the  Great  Northern 
and  Northern  Pacific  are  obliged  to  use.  Its  percentage  of  the  entire 
haul  ranges  from  70  per  cent  to  63  per  cent,  while  the  Great  Northern 
ranges  from  48  to  45  per  cent  and  the  Northern  Pacific  from  50  to  47 
per  cent. 

Two  factors  of  more  or  less  relative  advantage  to  the  parties  to  this 
contention,  or  parties  interested  in  the  differential  question  are  revealed 
by  these  comparisons: 

FIRST:  the  percentage  of  the  entire  haul  performed  by  the  interested 
parties. 

SECOND:    the  length  of  the  route,  from  start  to  finish. 

The  value  of  the  first  factor  lies  in  this,  that  a  line's  ability  to  meet 
the  demand,  or  secure  the.  preference  of  connections — feeders — in  the 
matter  of  division  of  rates,  bears  some  relation  to  its  share  of  the  total 
haul,  though  we  do  not  wish  to  be  understood  as  saying  that  the  share 
of  the  gross  through  rate  taken  by  any  of  these  lines  is  in  the  ratio  of 
their  respective  haul  to  the  total  haul.  For  example:  From  Portland, 
Me.,  the  Canadian  line  has  the  shortest  line  against  the  Northern  Pacific, 
and  besides,  would  receive,  upon  a  pro-rata  per  mile  basis  of  divisions, 
37  per  cent  more  of  the  through  rate  than  the  Northern  Pacific,  with 
which  to  satisfy  its  connections.  Taking  100  cents  as  the  rate  unit,  it 
would  have,  in  this  case,  27  cents  more  than  the  Northern  Pacific  would 
have  with  wthich  to  pay  arbitraries  or  to  persuade  connections  to  give 
it  the  preference  as  against  the  Northern  Pacific. 

Take,  as  another  illustration,  Baltimore.  These  are  extremes  that 
I  give  you.  The  Northern  Pacific  has  an  advantage  over  the  Canadian 
Pacific,  in  length  of  line,  by  385  miles,  or  9^  per  cent — assuming  that 
the  Canadian  line  will  use  its  New  York  route — but  the  Canadian  Pacific, 
upon  a  pro-rata  per  mile  basis  of  divisions,  would  receive  21  per  cent 
more  of  the  through  rate  than  the  Northern  Pacific  would  receive;  or, 
to  state  it  in  another  form,  out  of  the  through  rate  of  100  cents,  Baltimore 
to  San  Francisco,  the  Canadian  line  would  receive  13  cents  more  than 
the  Northern  Pacific,  and  would  be  by  that  much  better  able  to  satisfy 
its  connections.  If,  on  the  eastern  side,  the  Canadian  line  can  go  down 


H5 

into  Tennessee  and  Arkansas,  seeking  business  for  which  it  has  to  pay, 
out  of  the  short-line  through  rate  to  San  Francisco,  the  published  rates 
of  connecting  railroads  for  the  haul  of  over  1,000  miles  to  Minneapolis, 
why  can  it  not  use  the  thousand  miles  of  railroad  necessary  to  connect 
it  with  San  Francisco  on  the  western  side,  no  matter  what  the  arbitrary 
is  of  the  Northern  Pacific?  What  becomes  of  its  objection  to  using  the 
Northern  Pacific  road  from  Seattle  to  Portland,  because  it  cannot  afford 
to?  If  the  Canadian  line  elects  not  to  do  so,  but  for  any  reason  chooses 
the  steamship  connection,  in  preference  to  the  railroad  connection,  does 
it  not  thereby  create  whatever  disability,  if  any,  is  attached  to  that 
choice?  Is  it  under  such  circumstances  entitled  to  a  rate  advantage 
over  the  Northern  Pacific,  the  Great  Northern,  and  others?  It  takes 
business  from  Tullahoma,  and  from  Obion,  Tenn.,  and  from  Helena, 
Ark., — takes  it  through  up  over  this  line;  (indicating  on  map) — pulls 
it  away  from  the  Kansas  City,  more  direct  route. 

We  think  these  illustrations  prove  conclusively  that  the  Canadian 
Pacific  has,  and  can  work  an  all-rail  line  to  and  from  San  Francisco, 
quite  as  advantageously  as  the  Great  Northern  or  Northern  Pacific;  that 
it  has  the  same  alternative  in  the  use  of  an  all-rail  line  as  any  of  the  mixed 
all-rail  and  rail-and-water  lines  possess  and  in  that  respect  is  under  no 
disadvantage  or  disability  whatsoever. 

Though  it  seems  unnecessary,  it  may  be  well,  for  the  purpose  of 
reference,  to  delineate,  so  to  speak,  the  alternative  all-rail  lines  of  the 
Texas  &  Pacific  and  "Sunset."  The  detailed  showing  under  this  head 
will  also  be  found  in  "Exhibit  O",  if  you  care  to  refer  to  it,  showing 
the  authority  and  how  these  distances  are  made  up.  These  all-rail  lines 
compare  with  the  all-rail  line  of  the  Canadian  Pacific  as  follows: 

From  Portland,  Me.,  the  Canadian  line  is  longer  than  the  Texas  & 
Pacific  line  by  245  miles  and  shorter  than  the  "Sunset"  line,  this  line, 
(indicating  on  map)  by  168  miles. 

From  Boston,  the  Canadian  line  is  longer  than  the  Texas  &  Pacific 
line  by  339  miles  and  shorter  than  the  "Sunset"  line  by  21  miles— (all- 
rail  lines  I  am  speaking  of  now). 

From  New  York  the  Canadian  line  is  longer  than  the  Texas  & 
Pacific  line  by  446  miles  and  longer  than  the  "Sunset"  line  by  45  miles. 

ARBITRATOR  DAY— Are  you  speaking  of  all-rail,  now? 

MR.  STUBBS— All-rail  lines  altogether,  now. 

From  Philadelphia,  the  Canadian  line  is  longer  than  the  Texas  & 
Pacific  line  by  673  miles  and  247  miles  longer  than  the  "Sunset"  line. 

From  Baltimore  the  Canadian  line  is  longer  than  the  Texas  &  Pacific 
line  by  842  miles  and  296  miles  longer  than  the  "Sunset"  line. 

We  have  a  "Sunset  all-rail"  line  as  well  as  a  "Sunset-Gulf"  line. 
These  wide  disparities  from  -New  York,  from  Philadelphia  and  from 
Baltimore,  in  the  distances  via  the  Canadian  line  and  the  Texas  &  Pacific 


n6 

line  would,  as  I  have  heretofore  explained  with  respect  to  the  comparison 
with  the  Great  Northern  and  Northern  Pacific,  be  very  much  reduced 
if  the  Canadian  line  would  use  its  Minneapolis  route;  use  precisely  the 
same  line  the  Great  Northern  does,  and  which  in  part  is  used  by  the 
Texas  &  Pacific.  The  Texas  &  Pacific  line  is  down  through  St.  Louis, 
using  the  Trunk  Lines  up  to  St.  Louis.  The  "Sunset  all-rail"  line  is 
through  Cincinnati  and  Louisville,  thence  over  the  Louisville  &  Nashville 
R.  R.  to  New  Orleans. 

The  highest  percentage  of  haul  is:  for  the  Canadian  line,  70  per 
cent,  the  Texas  &  Pacific  73  per  cent,  the  Sunset  61  per  cent.  The  low- 
est percentage  of  haul  is:  for  the  Canadian  line  63  per  cent,  the  Texas 
&  Pacific  66  per  cent,  the  Sunset  56  per  cent. 

The  principal  object  of  introducing  this  last  comparison  is  to  illustrate 
what  little  account  is  taken  of  differences  in  distances  as  between  the 
American  lines  as  affecting  or  creating  differences  in  rates. 

From  the  detailed  statement  found  with  "Exhibit  O",  it  will  be 
observed  that  the  difference  in  the  respective  distances  of  the  Texas  & 
Pacific  and  the  "Sunset  all-rail"  lines,  in  favor  of  the  former  and  against 
*tfie  "Sunset"  (comparing  these  two  domestic  lines  now) — is  as  follows: 

From  Portland,    Me 415  miles 

"       Boston     319       " 

"       New  York 421       " 

"       Philadelphia   426       " 

"       Baltimore    446      " 

Yet  these  two  lines  work  upon  an  equality  of  rates. 

Compare  these  differences  with  the  differences  in  the  respective  dis- 
tances already  shown  of  the  all-rail  lines  of  the  Canadian  line  and  the 
Great  Northern,  in  favor  of  the  latter,  namely: 

From  Portland,   Me 2  miles 

Boston     53 

"       New  York 163       " 

"       Philadelphia   346       " 

Baltimore   482 

(the  differences  as  between  the  Canadian  line  and  the  Northern  Pacific 
are  less  than  these.)  and  it  will  be  seen  that  such  differences  in  distance 
as  exist  respectively  between  the  all-rail  lines  of  the  Canadian  line  and 
the  Great  Northern  and  Northern  Pacific  are  not,  either  in  theory  or 
practice,  regarded  by  the  American  lines  as  justifying  a  departure  from 
what  has  always  been,  and  is  still  believed  to  be,  the  necessary  rule  of 
equality  as  to  rates  for  San  Francisco  business. 


Take  another  example  to  illustrate  the  extreme  in  which  difference 
in  distance  is  disregarded  by  the  American  lines  in  their  adherence  to 
the  equality  of  rate  principle:  The  shortest  all-rail  line  from  the  cities 
used  in  the  previous  examples  to  San  Francisco  is  via  Chicago,  Omaha, 
and  the  Union  and  Central  Pacific.  Adopting  the  Grand  Trunk  route 
from  Portland,  Me.,  and  the  average  of  the  distances  over  the  principal 
lines  from  the  other  cities  as  the  measure  of  distance  east  of  Chicago; 
also  the  average  of  distances  over  the  four  principal  lines  between  Chi- 
cago and  Omaha  to  measure  the  haul  between  those  points,  the  shortest 
through  all-rail  line  will  be  found  to  be  as  follows : 

From  Portland,   Me 3499  miles 

"       Boston     3511       " 

"       New  York 3344       " 

Philadelphia   3270       " 

"       Baltimore    , 3192       " 

Compare  these  shortest  all-rail  lines  among  the  American  lines  with 
the  longest  all-rail  lines  in  same  group,  that  is  among  the  American  lines, 
which  are: 

From  Portland,  Me.,  via  "Sunset" 44io  miles 

"       Boston,  via  Northern  Pacific 43^7       " 

"       New  York,  via  "Sunset" 4221 

Philadelphia,  via  Northern  Pacific.. 4127       " 
Baltimore,  via  Northern  Pacific.  ..  .4068       " 

and  the  difference  will  be  found  as  follows: 

From  Portland,   Me 911  miles 

Boston    877 

New   York 878 

"       Philadelphia   857       " 

"       Baltimore   876       " 

These  differences  are  more  than  25  per  cent  of  the  total  short  lines' 
all-rail  distance,  yet  the  necessity  for  maintaining  for  San  Francisco 
business,  the  traditional  policy  of  uniform  and  equal  rates  between  all 
lines,  whether  all-rail  or  mixed  rail-and-water,  has  been  so  urgent  that 
the  American  lines  have  continuously  and  consistently  disregarded  them. 
They  have  in  the  same  manner,  since  the  enactment  of  the  Inter-state 
Commerce  law,  disregarded  the  distribution  of  tonnage — whether  one 
line  got  more  or  less,  a  large  share  or  a  small  share,  as  a  factor  in  deter- 


mining  the  relation  of  their  respective  rates.  In  California  freight  traffic 
they  have  practically  subscribed  to  the  doctrine  that  a  line  is  entitled  to 
no  less,  and  no  more,  than  all  it  can  secure  by  lawful  methods  on  an 
equality  of  rate  with  its  competitors.  If,  as  is  true,  it  is  the  traditional 
policy  of  the  American  lines  as  between  themselves  to  recognize  and 
practice  equality  of  rates  as  the  only  reasonable  and  just  rule  under  all 
the  circumstances,  to  govern  the  relations  of  their  respective  rates  for 
San  Francisco  traffic  with  this  eastern  territory,  regardless  of  the  charac- 
teristics of  their  respective  lines,  whether  all-rail  or  mixed  rail-and-water, 
whether  equal  in  length  or  widely  differing,  whether  rich  in  local  traffic 
or  poor,  whether  relatively  strong  or  weak,  upon  what  equitable  ground 
can  the  Canadian  line  maintain  a  demand  or  establish  as  a  right  that 
these  American  lines  (many  of  whom  present  the  same  characteristics  as 
are  pleaded  by  the  Canadian  line  in  support  of  their  demand),  shall  deal 
preferentially  with  a  stranger,  depart  from  a  well  settled  policy,  do  for 
it  what  they  dare  not  do  for  each  other,  by  giving  it  a  rate  advantage  in 
the  nature  of  a  differential?  Are  we  not  stretching  the  limit  of  hospi- 
tality when  we  admit  it  to  such  a  share  of  the  business  which  we  have 
developed,  promoted  and  sustained  (and  which  we  must  without  its  assist- 
ance, continue  to  promote  and  sustain),  as  it  can  do  upon  equal  terms? 
Are  we  not — in  pursuit  of  equity,  that  which  is  equally  right  and  just  to 
all  concerned — by  this  showing,  irresistibly  led  to  the  conclusion  of 
the  Inter-state  Commerce  Commission  in  the  Passenger  Differential 
case?  We  quote:  "If  this  Canadian  corporation  comes  into  the  United 
States  to  compete  for  traffic  between  points  in  the  United  States  it  should 
be  content  to  operate  upon  the  same  terms  with  its  American  competi- 
tors, unless  those  terms  are  clearly  unjust  and  unreasonable.  It  ought 
not  to  come  into  this  territory  and  insist  upon  a  different  order  of  things 
than  it  finds  there  unless  its  title  to  that  demand  is  clear  beyond 
question." 

As  near  as  I  can  judge  the  Canadian  Pacific  rests  its  claim  almost 
wholly  upon  custom,  upon  precedent,  as  between  the  American  lines. 
If  I  were  an  arbitrator  in  this  case,  I  might  say  that  it  had  made  out  a 
case  but  not  this  case.  It  has  been  urged  in  support  of  the  contention 
of  the  Canadian  line  that  it  is  customary  among  rail  carriers  to  accord 
differentials  to  so-called  weaker  lines,  meaning  carriers  partly  by  water 
and  partly  by  rail. 

For  the  purpose  of  reference  and  illustration  we  beg  to  file  with  the 
Board  a  statement  of  all  the  freight  differentials  now  in  effect  through- 
put the  country  according  to  the  records  of  the  Inter-state  Commerce 
Commission,  prepared  by  the  Secretary  of  the  Commission.  Although 
his  letter  stated  that  the  list  covered  all,  I  do  not  think  that  it  includes 
all.  It  is  marked  "Exhibit  K".  But,  in  order  to  make  up  any  deficiency 
in  that  respect  I  also  beg  leave  to  file  Central  Freight  Association  Cir- 


cular,  dated  Chicago,  November  26,  1897,  publishing  rates  to  and  from 
west  bank  Lake  Michigan,  which  are  not  shown  in  Secretary  Moseley's 
statement.  The  latter  is  marked  "Exhibit  K-2". 

I  also  desire  to  file  with  the  Board  a  statement  of  the  existing  freight 
differentials  in  the  territory  of  the  Joint  Traffic  Association,  as  shown 
by  its  records  furnished  by  Mr.  George  R.  Blanchard,  Commissioner. 
It  is  scheduled  as  "Exhibit  K-3". 

In  respect  to  these  customs  the  Canadian  Pacific  representative  says: 

"Later,  I  propose  to  show  the  great  number  in  extant  and  the 
universal  custom,  law  and  rule,  prevailing  throughout  the  whole 
United  States  and  Canada,  whereby  broken  routes,  rail-and-water, 
ocean-and-rail,  river-and-rail,  all  have  differential  rates  in  order 
to  enable  them  to  compete  with  their  direct  rail  rivals.  I  will  go 
into  the  detail  of  this  matter  later  on." 

He  did  go  into  the  detail  of  it.  Now,  under  the  common  law,  the 
common  law  of  England  which  has  spread  throughout  that  Empire  over 
all  its  Provinces  and  Colonies  and  because  of  its  wisdom  has  been  adopted 
by  almost  every  State  in  this  American  Union, — custom  is  limited. 
Customs  are  territorial.  Custom  must  be  universal;  it  must  be  of  ancient 
origin;  so  long  in  the  past  that  the  "memory  of  man  runneth  not  to  the 
contrary."  We  contend,  therefore,  that  the  use  of  this  class  of  differentials 
is  restricted  to  certain  territories  and  to  conditions  which  destroy  its  valid- 
ity as  a  general  rule  applicable  to  other  territories  and  all  conditions.  As 
we  have  already  amply  illustrated  differentials  are  not  now  used  and  have 
never  been  used  by  the  American  lines  between  themselves  for  San 
Francisco  business,  with  the  single  exception  of  the  Northern  Pacific 
to  Minneapolis,  which  was  dropped  very  suddenly,  although  the  respec- 
tive physical  characteristics  of  these  lines  differ  widely,  presenting  every 
feature  of  relative  advantage  and  disadvantage  that  enters  into  the  alleged 
reasons  for  the  use  of  differentials  in  other  territories.  They  are  not 
used  in  the  Southeastern  Mississippi  territory  on  business  to  and  from 
Ohio  and  Mississippi  River  crossings,  from  Cincinnati  to  New  Orleans, 
where  the  opportunities  for  mixed  rail-and-water  lines  are  frequent. 
They  are  not  used  for  San  Francisco  traffic  with  Montana,  Utah  and 
Colorado,  as  between  the  all-rail  lines  and  the  mixed  water-and-rail  lines. 
There  is  much  valuable  business  in  Montana,  Colorado  and  Utah,  com- 
peted for  by  these  direct  Central  Pacific,  Union  Pacific,  Denver  &  Rio 
Grande  lines  and  by  the  Oregon  Railroad  &  Navigation  Co.  and  Oregon 
Short  Line,  and  for  Montana  by  the  Great  Northern  and  the  Northern 
Pacific,  as  well  as  the  Oregon  Railroad  &  Navigation  Co.  and  Oregon 
Short  Line,  but  we  all  work  on  a  dead  level  equality  of  rates.  In  the 


I2O 

use  of  differentials,  as  in  the  classification  of  freight,  in  the  relation  of 
the  rate  charged  and  the  differences  hauled,  in  the  method  of  their 
association  and  co-operation,  each  group  of  carriers  serving  different 
territories  is  a  law  unto  itself.  It  would  not  be  argued  that  because  the 
Central  Freight  and  Trunk  Lines  use  the  Official  Classification  that  the 
Trans-Continental  lines  should  adopt  it  and  abandon  the  Western 
Classification  which  they  regard  as  more  suitable  to  their  traffic;  or 
because  the  first  class  rate  from  New  York  to  Chicago  is  75  cents  per 
hundred  pounds,  that  the  Trans-Continental  lines  should  charge  at  the 
rate  of  75  cents  per  hundred  for  hauling  first  class  freight  900  miles;  or 
that  because  the  Central  Freight  and  Trunk  lines  maintain  a  large  and  ex- 
tensive organization,  to  maintain  just  and  uniform  rates,  having  Commis- 
sioners, Joint-Commissioners,  Boards  of  Managers,  Boards  of  Arbitra- 
tors, that  the  Trans-Continental  lines  should  effect  and  maintain  the 
same  kind  of  an  organization.  We  submit  that  it  would  be  as  reasonable 
to  argue  in  this  manner  as  to  contend  that  because  differentials  are  used 
in  other  territories  for  reasons  and  purposes  that  may  be  wholly  justifiable 
to  the  carriers  interested,  that  their  use  should  be  recognized  and  adopted 
as  of  right, — not  expediency — as  of  right  between  the  American  lines  on 
the  one  hand,  and  the  Canadian  line  on  the  other  hand,  in  favor  of  the 
latter.  The  policies  of  the  railroads,  in  dealing  with  each  other,  as  con- 
nections or  competitors,  have  not  graduated  from  the  formative  period, 
nor  by  age,  uniformity,  or  universality  of  use  have  they  been  hardened 
and  polished  into  traditions  and  customs  having  the  force  of  law. 

Again,  we  submit  that  the  use  of  differentials  by  other  lines  is  of  no 
value  as  a  precedent  in  this  case,  because  that  use  is  the  product  of  an 
agreement  between  the  lines  interested.  The  term,  itself,  in  railroad 
parlance,  necessarily  implies  consent.  It  may  be,  and  according  to  the 
dictum  of  the  Inter-state  Commerce  Commission  is,  in  all  cases,  "Consent 
against  the  will",  which  leaves  the  consenting  party  with  regard  to  the 
question  of  right  or  title,  "of  the  same  opinion  still",  but  whether  the 
.agreement  is  founded  upon  an  acknowledgment  of  the  right  of  the  differ- 
ential line  or  lines  to  participate  in  the  traffic,  or  upon  an  involuntary 
concession,  as  a  matter  of  expediency,  that  it  or  they  may  participate  in 
the  traffic,  its  existence  always  depends  upon  agreement  between  the 
interested  parties.  In  the  case  at  bar,  the  essential  factor  of  consent, 
agreement,  is  absent.  The  American  lines  deny  the  right  of  the  Cana- 
dian line  to  participate  in  San  Francisco  business  unless  it  can  do  so 
upon  equality  of  rate  with  them.  They  refuse  to  concede  the  Canadian 
line  a  differential  as  a  matter  of  expediency,  and  are  here  to  try  the  ques- 
tion of  the  Canadian  line's  right  to  share  the  traffic  if  a  differential  is 
necessary  to  enable  it  to  do  so.  We  are  not  here  to  try  the  question 
whether  it  is  expedient  to  give  'the  Canadian  line  a  differential  in  order 
that  it  may  share  in  the  traffic.  That  is  not  the  question  submitted  for 


121 

determination  by  this  Board.  Therefore,  we  submit  that  the  absence 
of  consent,  or  agreement,  nullifies  the  customs  of  other  lines  in  other 
territories  as  precedents  in  this  case. 

We  further  submit,  that  because  differentials  in  other  territories  are 
the  product  of  consent  or  agreement,  it  will  be  found  that  they  are 
uniform  in  their  application  to  all  lines  interested  in  the  same  business, 
which  are  alike  circumstanced.  By  referring  to  ''Exhibit  K",  it  will  be 
observed  that  the  differential  rates  in  use  from  western  points  to  Seaboard 
territory,  to  Boston  and  Providence,  via  rail-and-ocean,  are  used,  alike, 
by  seven  different  lines  to  New  York  and  Jersey  City,  and  to  Philadelphia 
via  rail-and-ocean,  by  four  different  lines.  In  like  manner,  from  Boston 
to  western  points,  via  ocean-and-rail,  they  are  used  by  eight  different 
lines,  from  Providence  by  five  different  lines,  from  New  York  City  by 
five,  and  from  Philadelphia  and  Baltimore  by  three.  The  lake-and-rail 
and  rail-and-lake  differentials,  as  between  Detroit  and  Toledo  and  Sea- 
board cities,  in  both  directions,  are  applied,  not  by  a  single  line,  but  by 
all  lines  via  Cleveland  and  via  Sandusky.  Likewise,  the  differentials 
from  Atlantic  Seaboard  points  to  Texas  points  are  applied  to  all  lines 
via  Atlantic  Ocean  and  Gulf  ports,  differing  in  amount  as  between  the 
Atlantic  Ocean  and  the  Gulf  ports,  it  is  true,  but  that  is  because  there  is 
a  material  difference  in  the  ocean  service.  They  are  the  same  via  all  the 
Gulf  ports,  via  New  Orleans  and  the  different  lines, — via  Galveston  and 
the  different  lines.  Likewise,  the  differential  rates  from  Atlantic  Seaboard 
points  to  Colorado  points  and  Utah  points,  via  Atlantic  and  Gulf  ports, 
apply  by  all  the  several  lines,  whether  through  New  Orleans  or  whether 
through  Galveston.  All  the  broken  lines — mixed  water-and-rail  lines — 
use  the  same  differential,  regardless  of  whether  they  have  an  all-rail  line 
or  not.  For  example,  the  Union  Pacific  Denver  &  Gulf  road  forms  a 
part  of  the  Union  Pacific  all-rail  line  from  New  York  to  Colorado,  and 
also  a  part  of  the  mixed  rail-and-water  lines  via  New  Orleans  and  via 
Galveston  from  New  York  to  Colorado;  the  latter  taking  a  differential 
against  the  former.  The  Chicago,  Rock  Island  &  Pacific,  and  the  Aitchi- 
son,  Topeka  &  Santa  Fe,  respectively,  participate  in  both  the  all-rail 
lines,  via  Chicago,  and  the  mixed  water-and-rail  lines  via  New  Orleans 
and  via  Galveston,  from  New  York  to  Colorado  and  Utah,  the  latter  being 
so-called  differential  lines.  Again,  the  lake-and-rail  differential  rates  to 
North  Pacific  Coast  Terminals  apply  through  Lake  Huron  and  the  Straits 
of  Mackinaw,  via  Chicago  or  Milwaukee,  and  through  Lakes  Huron  and 
Superior,  via  Duluth,  via  Port  Arthur,  via  Gladstone  (the  connection  of 
the  "Soo"  line)  and  via  West  Superior.  That  is  to  say,  they  apply,  alike, 
over  all  the  rail  lines  west  of  Chicago,  Milwaukee,  West  Superior,  Port 
Arthur  and  Gladstone,  in  connection  with  Lake  Steamer  lines  east  of 
the  Junction  points  named,  and  every  one  of  these  rail  lines  west  of  said 


122 

junctions  has  rail  connections  making  through  all-rail  lines  over  which 
they  can  work  the  same  traffic. 

There  is  no  disparity;  every  rail  line  to  the  North  Pacific  Coast 
participates  in  these  differentials.  If  they  choose  to  work  with  lake 
connections,  the  Union  Pacific,  via  the  Oregon  Short  Line,  the  Union 
Pacific,  over  the  Ogden,  Central  Pacific  and  what  is  called  the  "Shasta 
Route"  to  Portland;  the  "Burlington"  and  the  "Rio  Grande",  over  the 
Oregon  Short  Line  or  over  the  Central  Pacific  and  the  "Shasta  Route", 
as  well  as  the  Canadian  Pacific  via  Port  Arthur,  in  connection  with  the 
"Soo"  line  from  Gladstone,  or  in  connection  with  the  all-rail  lines  from 
Chicago  and  Milwaukee — all  have  the  same  rate;  there  is  no  inequality. 

In  some  cases  these  differentials  are  allowed  in  part  to  cover  the 
marine  risks  which  the  shipper  takes.  This  is  true  of  the  differentials 
between  the  Atlantic  Seaboard  and  Texas,  and  of  those  between  Lake 
Michigan  ports  and  Atlantic  Seaboard,  and  of  the  lake-and-rail  differ- 
entials between  North  Pacific  Coast  points,  and  the  territory  east  and 
south  of  the  lake  ports,  etc.,  but  it  is  not  true  of  the  differentials  between 
western  points  and  Atlantic  Seaboard  territory  and  the  South-eastern 
territory,  in  which  cases  the  carriers  relieve  the  shipper  of  the  marine 
risk  and  give  him  lower  than  the  standard  all-rail  rates.  Customs  that 
differ  in  these  important  respects  can  hardly  be  said  to  have  the  uni- 
formity necessary  to  create  a  valid  rule  for  the  following  of  other 
territories. 

The  Canadian  Pacific  cited  also  a  differential  as  against  the  Great 
Northern  line's  contention  or  position  in  this  matter,  in  respect  to  Asiatic 
tonnage.  He  did  not  file  the  contract.  It  did  not  occur  to  me  that  that 
had  anything  to  do  with  this  case,  or  I  should  have  brought  a  copy  of 
the  contract  along.  It  relates  to  Oriental  traffic,  Asiatic  traffic,  «ast- 
bound,  only;  that  is,  inward  to  the  United  States,  that  is  conducted  by 
the  Pacific  Mail  Steamship  Company  via  the  Port  of  San  Francisco,  the 
Occidental  &  Oriental  Steamship  Company  via  the  Port  of  San  Fran- 
cisco, the  Great  Northern  Steamship  Company,  or  rather  the  Nippon 
Yusen  Kaisha  Company — the  English  of  which  is  the  Japan  Mail  Steam- 
ship Company — in  connection  with  the  Great  Northern,  the  Northern 
Pacific  Steamship  Company,  in  connection  with  the  Northern  Pacific 
and  the  Canadian  line's  Steamers  through  the  Port  of  Vancouver.  Not 
only  now,  but  for  all  time  in  the  past,  ever  since  that  traffic  was  originally 
diverted  from  the  Panama  Route  by  the  Pacific  Mail  Co.  to  the  Central 
and  Union  Pacific  line,  the  rate-making  power  has  been  lodged,  neces- 
sarily lodged,  in  the  steamship  companies.  We  have  to  compete  with 
the  Suez  Route  and  with  vessels  running  around  the  Cape  of  Good  Hope, 
a\nd  have  never  been  able  to  take  half  the  tonnage  that  goes  into  the 
United  States  and  Canada;  even  with  the  multiplication  of  lines  of  late 
years,  we  have  not  succeeded  in  diverting  all  this  tonnage  to  the  Pacific 


I23 

ports.  Necessarily,  the  handling  of  these  rates  must  be  left  with  the 
agencies  at  Hong  Kong  and  Yokohama  and  Nagasaki  and  other  ports 
there.  All  we  have  to  do,  that  is  so  far  as  the  roads  which  I  am  con- 
nected with  are  concerned,  is  to  accept  what  rates  are  brought  to  us,  to 
honor  their  bills  of  lading.  This  contract  that  is  referre'd  to  is  a  contract 
between  the  steamship  lines,  except  that  the  Central  Pacific  and  Union 
Pacific  and  its  connections,  the  Atchison,  Topeka  &  Santa  Fe,  etc.,  are 
obliged  to  accept  any  rate  that  is  found  necessary  to  take  that  business. 
They  are  not  parties  to  it.  They  are  not  signatory  parties  to  the  contract. 
Speaking  for  the  lines  via  San  Francisco,  I  never  was  consulted  as  to 
whether  that  contract  should  be  made  or  not.  I  received  a  copy  of  the 
contract  after  it  had  been  made.  It  originated  exactly  as  most  differen- 
tials are  originated — by  the  laying"  on  of  a  line  which  had  to  be  advertised, 
which  had  no  business,  but  which  was  not  particularly  weak  in  any  other 
respect,  as  compared  with  the  older  lines.  That  line  said:  "Give  me 
some  of  this  business  or  I  will  knock  down  your  rates."  The  effect  of 
that  kind  of  competition  was  to  bring  the  silk  rates  from  $8.00  per  cwt. 
down  to  $3.00  per  cwt., — was  to  reduce  the  average  rate  on  tea  from 
$3.00  per  cwt.  down  to  as  low  as  three-quarters  of  a  cent  a  pound  or  75 
cents  per  cwt.  The  Canadian  Pacific  Steamship  Line,  the  Northern 
Pacific  Steamship  Line,  the  Occidental  &  Oriental  Steamship  Company 
and  the  Pacific  Mail  Steamship  Co.,  naturally  wished  to  stop  that  sort  of 
business,  so  made  this  agreement.  They  made  it  just  as  soon  as  they 
could.  It  was  a  case  of  the  stronger  lines  going  to  the  weaker  line  and 
giving  it  an  advantage  in  order  that  their  business  might  not  be  totally 
— almost  wholly — destroyed.  The  Nippon  Yusen  Kaisha,  when  entering 
upon  this  business,  adopted  the  same  tactics  that  the  Canadian  Pacific 
adopted  when  it  first  entered  the  same  business.  The  Canadian  line,  at 
the  outset,  pursued  the  same  tactics,  which  was  simply  the  knocking  of 
the  bottom  out  of  rates  and,  primarily,  it  is  responsible  for  the  reduction 
of  the  rate  on  tea  from  $3.00  to  75  cents  per  hundred  and  for  silk  from 
eight  cents  to  three  cents  per  pound.  Afterwards,  the  Northern  Pacific, 
which  first  entered  the  Oriental  trade  by  using  sailing  vessels,  but  after- 
wards put  on  a  line  of  steamers,  or  to  state  it  more  correctly,  afterwards 
hired  the  Agent,  whom  the  Canadian  Pacific  had  successfully  employed 
to  bushwhack  the  American  lines  in  Asia — hired  him  away  from  the 
Canadian  Pacific,  Mr.  Dodwell,  the  shrewdest  and  sharpest  man  in  this 
traffic  in  Asia,  who  employed  steamships  and  began  the  same  tactics 
against  the  American  lines  in  connection  with  the  Northern  Pa- 
cific that  he  had  formerly  used  in  connection  with  the  Canadian 
Pacific.  Then,  and  not  till  then,  was  the  Canadian  line  ready  to  talk 
about  an  agreement  to  keep  up  rates.  Meantime  it  had  se- 
cured a  large  portion  of  the  traffic;  had  diverted  it  from  San 
Francisco  to  its  own  line.  It  wanted  to  keep  the  business  and 


124 

wanted  to  get  reasonable  rates  out  of  it.  Later,  as  I  hav^  said,  when 
the  Japan  Mail  Steamship  Company  laid  on  its  steamer  line,  it  followed 
in  the  footsteps  of  the  Canadian  Pacific  and  the  Northern  Pacific,  began 
to  cut  rates.  Meantime  the  Northern  Pacific,  having  secured  a  portion  of 
this  business,  had  become  anxious  to  preserve  it  for  its  line  and  to  get 
better  rates  out  of  it.  Out  of  this  experience  came  this  agreement, — • 
that  is  to  say,  the  Canadian  Pacific  Steamship  Line,  Northern  Pacific 
Steamship  Line,  Occidental  &  Oriental  Steamship  Co.  and  Pacific  Mail 
S.  S.  Co.,  all  agreed  that  it  was  better  to  co-operate,  to  maintain  rates, 
than  to  continue  cutting  against  each  other,  but  in  order  to  make  the 
co-operation  effective,  it  was  necessary  to  bring  the  Japan  Mail  Steam- 
ship Co.  into  the  compact.  The  Japan  Mail  Steamship  Co.,  being  a  new 
line  and  claiming  that  that  was  a  disadvantage  against  the  older  lines, 
demanded  the  right  to  make  lower  rates.  The  other  steamship  lines 
yielded  simply  because  by  no  other  means  could  reasonable  rates  be  had. 
That,  briefly,  is  the  history  of  that  case. 

ARBITRATOR  DAY— Who  are  the  signers  of  that  contract,  Mr. 
Stubbs? 

MR.  STUBBS— Well,  for  the  Pacific  Mail  and  the  Occidental  & 
Oriental  Steamship  Companies,  the  General  Agent  over  at  Hong  Kong 
or  Yokohama. 

MR.  KERR — It  was  signed  at  Hong  Kong. 

-MR.  STUBBS — Then  Mr.  Van  Buren  was  the  man.  And  for  the 
Northern  Pacific,  Mr.  Dodwell,  and  for  the  Japan  Mail  Steamship  Co., 
I  do  not  know. 

MR.  KERR — By  their  Manager  over  there. 

MR.  STUBBS — Now,  I  will  venture  to  say  that  the  Denver  &  Rio 
Grande,  the  "Burlington",  the  ''Rock  Island"  and  the  Union  Pacific  and 
"Northwestern",  our  connections,  who  participate  in  that  traffic,  do  not 
know  that  there  is  any  such  agreement,  which  confirms  that  what  I  have 
stated  is  true,  that  it  was  made  over  there  as  between  the  steamship 
lines. 

In  "Exhibit  K"  will  be  found  a  statement  that  the  rates  between  San 
Francisco  and  points  on  and  east  of  the  Missouri  River — "Exhibit  K" 
is  a  statement  made  up  by  Secretary  Moseley  of  the  Inter-state  Com- 
merce Commission,  I  did  not  know  where  else  to  get  it.  In  "Exhibit  K" 
will  be  found  a  statement  that  the  rates  between  San  Francisco  and  points 
on  and  east  of  the  Missouri  River  via  Canadian  Pacific  Railway  and 
Pacific  Coast  Steamship  Co.  are  10  per  cent  less  than  the  rates  via 
American  lines.  It  so  appears  because  that  is  the  form  in  which  the 
Canadian  Pacific  publishes  its  San  Francisco  rates.  The  American  lines 
have  not  conceded  the  Canadian  Pacific  a  10  per  cent  differential,  nor 
any  differentials  whatsoever  since  1892.  They  have  not  a  differential 
to-day.  They  may  make  a  difference  in  rates,  but  it  is  not  a  differential. 


125 

A  differential  requires  an  agreement, — consent.  As  we  have  already 
stated  the  Inter-state  Commerce  Commission  has  repeatedly  charac- 
terized the  purpose  of  a  differential  as  essentially  a  device  for  the  dis- 
tribution of  traffic.  That  that  is  the  purpose  we  think  is  obvious  and  that 
it  is  equally  obvious  that  the  existence  of  a  differential  depends  upon  an 
agreement  between  interested  carriers.  It  follows  then  that  an  agree- 
ment between  two  or  more  carriers  that  one  or  more  of  them  shall  use 
differentials  against  the  others  in  competing  for  a  given  traffic,  is  an 
agreement  between  the  same  carriers  to  distribute  the  same  traffic 
between  them.  The  lawfulness  of  such  agreement  is  therefore  doubtful 
and  we  ask  whether  the  questionable  practice  in  this  respect  of  other 
lines  in  other  territories  can  create  a  rule,  an  equitable  rule  to  be  followed 
by  other  lines  in  respect  to  other  business?  Wednesday  morning  the 
Canadian  Pacific  advocate  said: 

"The  law  not  permitting  an  agreement  or  combination  whereby 
either  physical  division  of  tonnage  may  be  made  or  a  money  pool, 
or  any  other  grounds  upon  which  broken  rail-and-water  lines  can 
obtain  a  reasonable  proportion  of  the  traffic,  as  against  direct  rail 
line  competitors.  This  being  the  case,  numerous  rail-and-water 
lines  have  been  granted  and  for  years  have  worked  under  differ- 
ential rates  as  against  their  all-rail  competitors." 

In  this  language  he  confesses  that  the  differential  has  the  same  object 
as  a  pool.  Its  object,  its  very  essence  is  the  distribution  of  traffic.  For 
example:  the  Canadian  Pacific  says,  "We  can't  get  a  fair  share  of  this 
traffic  unless  we  have  a  differential;  ergo,  the  American  lines  must  give 
us  a  differential  so  we  can  get  a  fair  share  of  the  traffic."  That  means, 
that  we  must  force  onto  its  lines  a  fair  share  of  the  traffic;  that  means 
that  we  must  allot  to  it  a  fair  share  of  the  traffic;  that  we  must  give  to 
it  a  share  of  the  traffic  that  it  can  enjoy  exclusively  and  without  inter- 
ference from  us. 

It  is  not  at  all  doubtful  that  pools  of  freight  and  pools  of  earnings 
between  carriers  are  expressly  forbidden  by  the  Inter-state  Commerce 
law.  Nor  is  it  open  to  question  that  such  pools  are  devices  pure  and 
simple  to  distribute  the  subject  traffic,  or  the  earnings  therefrom  which 
amounts  to  the  same/among  the  lines  parties  to  the  pool.  Their  purpose 
is  identical  with  the  purpose  of  the  differential.  They  were  prohibited 
by  law  in  response  to  a  popular  demand,  and  notwithstanding  that  the 
consensus  of  opinion  among  experts  in  transportation  and  legislative 
regulation  thereof  is  that  the  inhibition  of  pools  was  a  mistake ; — that  to 
legalize  pooling  would  be  the  longest  step  Congress  could  take  toward 
making  the  Inter-state  Commerce  Act  what  it  was  designed  to  be  and 
what  it  is  certain  yet  to  become  unless  our  political  organization  proves 


126 

a  failure,  a  wise  and  beneficent  (to  public  and  carrier  alike),  regulator  of 
commerce  between  the  States,  public  opinion  seems  to  have  crystallized 
against  them.  A  pool  of  freights  would  be  far  less  obnoxious  to  the 
shipping  public,  if  for  no  other  reason,  for  this  reason  alone,  that  it  leaves 
the  shipper,  who  cares  nothing  about  what  the  carrier  does  with  the 
freight  money  after  he  has  paid  it,  free  to  use  the  line  he  prefers  to  ship 
his  goods  over,  without  the  constraint  imposed  by  an  unfavorable  differ- 
ence in  rates.  If  the  pooling  of  freight  is  so  obnoxious  to  public  senti- 
ment as  to  make  it  impossible  by  legislative  sanction,  can  it  be  said  or 
fairly  presumed  that  the  use  of  the  more  inequitable  device  of  differentials 
to  accomplish  the  same  end  is  less  offensive  to  the  public  and  a  less  dan- 
gerous expedient  for  the  carriers  to  adopt? 

For  these  reasons,  therefore,  we  submit  to  the  Board  that  the  cus- 
toms of  other  lines  in  other  territories  in  respect  to  the  use  of  differentials 
are  of  no  value  as  precedents;  are  not  safe  guides  to  aid  or  lead  the 
Board  to  a  just  determination  of  the  question  submitted;  I  will  recapitu- 
late them,  namely: 

FIRST,  the  differential  is  not  used  by  all  lines  in  all  territories  where 
the  conditions  measured  by  the  circumstances  governing  their  use  in 
some  territories  are  substantially  similar. 

SECOND,  in  the  territories  which  do  employ  them  they  are  uni- 
formly applied  to  all  lines  interested  which  work  under  substantially  the 
same  circumstances  and  conditions,  or  to  put  it  in  another  form,  which 
are  alike  in  their  disabilities  as  compared  with  their  all-rail  competitors. 
In  this  case  the  Canadian  line  stands  alone  among  all  the  lines  interested 
in  the  San  Francisco  trade  in  its  demand  for  a  differential ;  and  not  only 
that,  but  it  also  demands  that  it  alone  sihall  enjoy  the  differential — for 
that  is  the  submission — regardless  of  what  Mr.  Kerr  says  in  his  state- 
ment here  about  his  willingness  to  give  the  Great  Northern  and  the 
Northern  Pacific  a  differential — it  stands  alone  and  demands  that  it  alone 
shall  enjoy  the  differential,  regardless  of  the  fact  that  many  of  the  Amer- 
ican lines  present  the  same  unattractive  features  which  are  pleaded  as  rea- 
sons why  the  Canadian  line  cannot  participate  in  the  trade  unless  accorded 
a  differential.  Take  the  examples  that  have  been  given.  We  are  willing 
to  stand  upon  the  showing  of  differentials.  We  are  willing  to  take  the 
case  as  made  out  by  the  Canadian  Pacific  representative  and  stand  before 
this  Board  on  that.  Has  he  given  you  one  example  of  ineffable  cheek  on 
the  part  of  an  American  line  asking  for  an  exclusive  differential  against 
the  Canadian  line  or  against  another  American  line?  Take  the  Canadian 
examples  that  he  gave  in  response  to  a  question  from  me  on  the  Koot- 
enay  business:  "Don't  you  make  the  same  differential  rate  by  your  mixed 
water-and-rail  lines?"  The  answer  was:  "Certainly."  Where  is  the 
advantage  or  the  disadvantage  on  the  part  of  any  of  the  competitors? 
The  case  is  analogous  to  the  case  which  I  have  lately  illustrated  to  the 


127 

North  Pacific  Coast.  Think  of  it.  In  this  case  he  comes  in  and  says,  we 
alone  want  a  differential  against  the  American  lines  on  San  Francisco 
business  because  differentials  are  made  to  all  these  lake  ports  in  connec- 
tion with  all  the  lake  lines  to  the  North  Pacific  Coast.  He  admits  enjoy- 
ing the  same  rate  that  every  other  line  works  on  in  that  territory;  he 
admits  that  they  work  upon  an  equality  of  rates  to  the  North  Pacific  Coast 
by  all-rail;  he  admits  that  they  work  upon  an  equality  of  rates  to  the 
North  Pacific  Coast  by  lake-and-rail. 

THIRD,  getting  back  to  the  question  of  custom,  the  nature  of  the 
differential  is  not  uniform  as  between  different  territories.  Uniformity 
is  essential  as  well  as  age  to  make  a  custom  valid  as  a  precedent.  In  some 
respects  it  is  in  whole  or  in  part  compensatory  for  the  marine  risk  to 
which  the  shipper  is  subjected.  In  other  cases,  it  is  independent  of  or 
super-added  to  the  assumption  of  this  risk  by  the  carrier. 

FOURTH,  there  is  a  reasonable  assumption  that  the  differential  is 
repugnant  to  the  spirit  of  our  laws  and  obnoxious  to  public  sentiment. 

Returning  to  the  doubtful  lawfulness  of  pools  which,  if  judicially 
determined,  might  include  differentials  because  the  latter,  like  the  former, 
are  essentially  a  device  for  the  distribution  of  traffic  between  competing 
carriers,  we  do  not  wish  to  be  understood  as  acknowledging  that  the 
legislation  which  forbids  pools  in  which  there  is  reason  to  fear  differ- 
entials may  be  included,  if  the  issue  is  made  and  the  question  judicially 
determined,  is  founded  on  right  principles,  nor  that  public  sentiment 
behind  that  legislation  grew  from  dispassionate  and  reasonable  inquiry 
into  the  nature  of  and  effect  upon  the  public  interest  of  lawful  pools.  On 
the  contrary,  we  believe  that  pools  between  railroads  which  could  be 
enforced  by  law,  would  be  no  less  beneficial  to  and  productive  of  the 
public  interest,  than  they  would  be  to  the  carriers;  but  we  must  take 
conditions  as  we  find  them.  The  point  is,  pools  being  forbidden  by  law, 
if  differentials  are  essentially  devices  to  accomplish  the  same  end,  and 
are  objectionable  to  the  shipping  public,  can  it  be  said  that  any  line  is 
entitled  to  a  differential?  If  the  question  submitted  to  this  Board  were, 
"Is  the  Canadian  line  entitled  to  a  pool  of  freight  with  the  American 
lines?"  is  there  any  doubt  that  the  Board  would  promptly  answer  in  the 
negative,  if  on  no  other  ground,  upon  the  ground  that  the  law  forbids  it. 
If  it  has  no  right  or  title  to  demand  a  pool,  has  it  any  right  or  title  to 
demand  any  other  less  defensible  device  to  secure  the  same  end?  If  its 
title  to  a  differential  were  undisputed  upon  other  grounds,  would  not 
the  fact  that  it  is  in  its  essence  a  device  to  distribute  traffic  between 
competing  carriers  inject  a  fatal  flaw? 

The  American  lines  protest  against  the  use  of  differentials  as  a  means 
of  removing  or  equalizing,  as  the  common  phrase  is,  relative  transport- 
ation disabilities,  on  the  ground  that  equalization,  merely,  is  not  their 
real  purpose.  Their  real  object  is  to  divert  traffic  from  its  natural  to  an 


128 

unnatural  channel.  To  accomplish  this  end,  there  is,  and  must  always  be, 
a  surplus  of  benefit  or  advantage  over  and  above  the  level  of  equality  of 
service,  to  win  the  shipper  from  his  accustomed  and  otherwise  preferred 
line.  They  are,  therefore,  designed  to  give  the  so-called  weaker  lines  a 
substantial  though  artificial  advantage  over  the  standard  lines  in  respect 
to  the  subject  traffic  and  we  protest  that  the  Canadian  line  has  in  no 
sense  a  right,  legal  or  moral,  absolute  or  equitable,  superior  to  ours,  in 
respect  to  the  carrying  trade  of  San  Francisco. 

We  protest  against  their  use  on  the  ground  of  inequity.  This  is 
apparent  from  the  occasion  of  their  use.  The  line  which  demands  a 
differential  from  its  competitors,  by  that  demand  confesses  that  its  route 
is  one  that  the  business  will  not  naturally  follow.  It  asks,  therefore,  an 
adjustment  of  rates  that  will  force  the  business  out  of  its  natural  chan- 
nels. To  force  business  from  a  natural  to  an  unnatural  channel  cannot 
be  fair  or  equitable  in  any  respect.  It  is  not  fair  or  equitable  to  the 
carrier,  which  is  by  this  device  deprived  of  its  business.  It  is  not  fair  to 
the  shipper  who  is  thus  forced  to  use  a  route  which  he  would  not  choose 
but  for  this  device. 

We  protest  against  them  on  the  ground  of  inadequacy.  If  it  be 
assumed,  for  the  purpose  of  argument,  that  some  portion  of  a  common 
traffic,  in  the  sense  that  it  is  open  to  the  competition  of  all,  ought  to  be 
of  right  secured  to  each  and  every  line,  even  if  it  is  necessary  to  force 
it  out  of  its  natural  channels,  then  we  aver  that  no  differential  or  scheme 
of  differentials  has  been  devised,  or  can  be  invented  which  will  distribute 
said  traffic  fairly  between  all  parties.  To  do  so,  it  must  be  made  to  act 
automatically,  increasing  its  force  and  power  of  diversion  as  circum- 
stances require,  until  a  fair  share  of  the  traffic  is  secured  for  the  differ- 
ential line,  then  ceasing  to  operate  further  than  is  necessary  to  maintain 
the  distribution  thus  effected.  A  rate  that  will  induce  a  merchant  to  ship 
a  certain  amount  of  one  class,  or  of  all  classes  of  goods  over  a  differential 
line,  will  influence  him  to  send  all,  or  the  greater  part  of  the  same  class 
or  classes  of  goods  over  that  line.  If  a  differential  of  five  cents  will  turn 
one  lot  of  nails,  or  one  lot  of  cotton  piece  goods  from  its  natural  route, 
it  will  divert  all  of  those  goods  from  the  same  route.  The  differential 
lines  assume  at  the  outset  that  they  are  entitled  to  all  the  business  obtain- 
able under  the  differential  as  fixed,  no  matter  how  large  a  share  of  the 
whole  it  may  prove  to  be.  Per  contra,  the  standard  rate  lines  from  the 
beginning  assume  that  the  differential  lines  are  entitled  to  no  more  of  the 
business  than  the  differential,  as  fixed,  diverts  to  their  line,  be  it  so  small 
that  the  earnings  therefrom  will  not  pay  for  the  publication  of  the  tariffs. 
Between  these  extremes  there  is  and  always  will  be  constant  friction, 
which  tends,  inevitably,  to  the  very  rate  disturbances  the  device  was  in- 
vented to  prevent.  Here  in  the  territory  where  differentials  are  most  in 
use,  east  of  Chicago,  in  the  Trunk  Line  and  Central  Freight  Association 


129 

territories,  we  all  know  that  they  are  not  maintained,  except,  perhaps, 
during  a  period  when  the  pressure  of  tonnage  upon  all  lines  is  equal  to 
or  above  their  capacity.  When  tonnage  is  slack,  when  the  boys  are  on 
the  streets  hustling  for  business,  to  get  something  to  fill  their  cars,  away 
goes  the  differential.  Those  are  the  conditions  that  exist  between  Chi- 
cago and  New  York  and  other  Atlantic  Seaboard  cities  to-day,  and  are 
simply  a  repetition  of  what  annually  occurs,  notwithstanding  the  mag- 
nificent organization  that  they  have  down  in  New  York  for  the  purpose 
of  maintaining  rates.  Mr.  George  R.  Blanchard,  who,  by  reason  of  his 
long  incumbency  of  the  Chairmanship  of  the  Central  Traffic  Association, 
and  the  Joint  Traffic  Association,  respectively,  within  whose  territories 
the  differential  is  in  most  common  use,  together  with  his  great  ability, 
qualifies  him  to  speak  with  authority  on  this  subject,  says,  of  differen- 
tials: 

"Their  primary  object  being  to  secure  to  the  weaker  lines, 
only  fair  shares  of  a  specific  business  contested  for,  I  have  already 
recorded  my  judgment,  that  in  the  first  instance  what  is  a  fair 
share  is  undeterminable  and  usually  unacceptable  in  its  result,  and, 
secondly,  that  no  scales  of  differentials  have  ever  accomplished 
their  purpose.  If  a  differential  line  gets  less  traffic  than  such  rates 
were  intended  to  divert,  it  proceeds  to  help  itself.  They  either 
divert  too  much  traffic  away  from  the  first  lines,  or  too  little." 

I  confidentially  submit  that  expression  from  Mr.  Blanchard,  whom 
we  all  know,  as  being  what  every  expert  traffic  manager  will  testify  to. 
Get  him  on  the  stand,  under  oath,  or  not  under  oath,  and  ask  him  for  his 
candid  opinion  as  the  result  of  his  observation  and  experience,  and  that 
will  be  the  answer. 

We  protest  against  the  use  of  a  differential  by  the  Canadian  line,  on 
the  ground  that  its  effect  will  be  unjustly  discriminative  against  places. 
It  would  make  lower  rates  to  San  Francisco  than  to  other  California  and 
Pacific  Coast  common  points.  From  the  opening  of  the  first  over-land 
line,  it  has  been  the  custom  to  make  the  same  rates  to  and  from  Sacra- 
mento, Marysville,  Stocktqn  and  San  Jose,  as  were  made  to  and  from 
San  Francisco.  These  points  are  connected  with  San  Francisco  by  water 
lines  of  transportation  and  can  use  the  ocean  routes  with  but  an  imma- 
terial difference  in  cost  as  compared  with  San  Francisco's  cost  in  using 
the  same  routes.  When  the  rail  lines  were  opened,  connecting  Portland, 
Seattle  and  Tacoma,  and  Los  Angeles  and  San  Diego,  directly  with 
eastern  cities,  the  same  principle  of  equality  of  rate  with  San  Francisco 
was  adopted,  and  has  since  been  maintained  with  but  very  little  variation. 
By  the  use  of  a  differential  on  San  Francisco  business,  the  Canadian  line 
upsets  this  custom,  destroys  the  long  established  and  just  relations  of 
the  rates  of  common  points  to  San  Francisco,  and  introduces  a  discrim- 

9 


ination  that  we  regard  as  unjust  to  the  common  points  and  as  a  disturber 
of  several  commercial  conditions.  Moreover,  this  discrimination  is  not 
invited  by  the  merchants  of  San  Francisco. 

We  object  to  the  use  of  a  differential  by  the  Canadian  line,  because 
it  has  no  right  to  preference  over  any  of  the  American  lines,  no  superior 
right,  no  higher  title  to  either  a  fixed  and  determined  share  of  the  San 
Francisco  carrying  trade,  or  to  an  unlimited,  undefined  share  of  that 
trade,  than  is  possessed  by  each  of  the  several  American  lines  which  stand 
opposed  to  it  in  this  case.  If  by  restraint  of  law,  or  for  any  other  reason, 
we  are  debarred  from  distributing  this  traffic  among  ourselves  in  equit- 
able and  satisfactory  proportion,  if  we  submit  to  these  restraints,  why 
should  not  the  Canadian  line  not  likewise  submit?  If  we,  as  between  our- 
selves, submit  to  the  rule  of  rate  equality,  regardless  of  its  effect  upon 
the  volume  of  the  traffic  we  respectively  carry,  is  it  unreasonable  that 
we  should  ask  the  Canadian  line  to  likewise  submit  to  the  rule  of  rate 
equality?  In  order  to  recognize  the  claim  of  the  Canadian  line  in  this 
case,  we  must  admit  that  the  Dominion  Government  of  Canada  has 
created  a  superior  being  in  respect  to  the  domestic  commerce  of  the 
United  States,  than  the  beings  created  by  the  United  States  Government, 
and  the  several  State  Governments;  a  being  with  higher  rights  and 
superior  title. 

To  the  suggestion  that  our  record  is  against  us,  that  the  American 
lines  have  established  a  valid  precedent  for  the  claim  of  the  Canadian  line 
by  hitherto  conceding  what  it  now  asserts  as  its  right,  we  reply  that  we 
are  entitled  to  the  consideration  of  the  question  submitted  as  from  the 
beginning,  because: 

FIRST,  this  is  the  first  time  that  the  question  of  the  right  or  title  to 
a  differential  of  one  line  against  others  competing  for  the  same  trade 
has  been  referred  to  a  disinterested  tribunal  before  which  the  parties 
could  appear  disarmed  of  all  arguments  save  the  justice  of  their  cause, 
whose  deliberations  would  be  calm  and  dispassionate  and  whose  decision 
would  be  given  without  fear  of  loss  or  hope  of  gain,  after  a  patient  hear- 
ing of  both  sides;  the  first  time  that  the  question  has  been  submitted  to 
the  judgment  of  a  tribunal  whose  conclusions  will  establish  a  sufficient 
precedent  or  valid  rule. 

SECOND,  the  American  lines  have  never  admitted  the  title  or  right 
of  the  Canadian  line  to  a  differential  under  their  rates,  but,  on  the  con- 
trary, have  protested  against  it,  and  submitted  to  it  only  under  the  con- 
straint of  fear  that  the  value  of  their  San  Francisco  business  and  other 
intermediate  and  dependent  business  would  be  destroyed.  Under  the 
first  head,  we  aver  that  originally,  when  the  American  lines  yielded  to 
the  demand  of  the  Canadian  line  for  a  differential,  the  questions  sub- 
mitted and  determined  by  the  parties  themselves,  under  the  influences 


of  hope  of  gain,  if  the  differential  was  granted,  and  the  fear  of  almost 
incalculable  loss  were  it  denied,  was: 

"Is  it  expedient  to  give  to  the  Canadian  line  a  differential?" 

The  American  lines  were  never  even  asked  to  admit  the  title  and 
right  of  the  Canadian  line  to  that  advantage  over  them. 

Under  the  second  head,  we  submit  that  the  American  lines  consented 
to  the  freight  differentials  enjoyed  by  the  Canadian  line  previous  to  1893, 
at  the  same  time  under  same  conditions,  and  for  similar  reasons,  that 
they  consented  to  the  passenger  differentials  so  lately  investigated  and 
pronounced  against  by  the  Inter-state  Commerce  Commission.  Here  is 
what  the  Commission  says  under  that  head: 

"The  first  Trans-Continental  Association  was  formed  in  1886." — (In 
that  respect  they  have  made  a  mistake.  It  was  a  re-organization  in  1888, 
following  the  freight  war  with  the  Atchison  people.) — ''Although  the 
evidence  is  not  very  clear,  we  are  inclined  to  think  that  the  Canadian 
Pacific  was  from  the  first  a  member  of  that  Association." — (It  was;  from 
the  first  it  was  a  member  of  the  re-organized  Association.) — "Mr.  Eustis, 
who  was  at  that  time  General  Passenger  Agent  of  the  Chicago,  Burling- 
ton &  Quincy  Railroad,  and  who  in  that  capacity  participated  in  the 
discussions  which  led  to  the  formation  of  that  Association,  was  of  the 
opinion  that  the  Canadian  Pacific  only  came  into  it  upon  condition  that 
it  should  be  allowed  the  differential  which  it  then  had  upon  Pacific  Coast 
business.  The  parties  who  represented  the  Canadian  Pacific  in  these 
negotiations  were  not  before  us,  but  we  are  inclined  to  think  that  the 
recollection  of  Mr.  Eustis  is  substantially  correct." 

"The  Canadian  line  was  insisting  that  it  was  entitled  to  this  differ- 
ential. It  had  apparently  for  two  years  actually  enjoyed  it." — (That  is 
a  mistake,  as  I  showed  you  yesterday.) — "It  may  be  doubted  whether  it 
could  have  obtained  by  that  route  and  at  that  time  any  considerable  part 
of  the  business  without  it,  and  it  is  hardly  probable  that  it  would  consent 
to  become  a  member  of  an  Association  with  power  to  fix  its  rates,  every 
other  member  of  which  would  be  opposed  to  a  differential  unless  it  was 
understood  either  expressly  or  tacitly  that  it  should  continue  to  enjoy 
one.  This,  however,  was  against  the  earnest  protest  of  the  American 
lines,  which  had  always  insisted  that  the  differential  was  unjust  and  only 
consented  to  it  as  a  matter  of  expediency." 

The  speaker  conducted  the  preliminary  negotiations  with  the  Cana- 
dian Pacific  Railway  Company,  visiting  Montreal  for  that  purpose,  and 
he  avers — and  Mr.  George  Olds,  the  General  Traffic  Manager  at  that 
time  will  not  deny,  that  from  the  very  start,  the  Canadian  line  demanded 
either  a  guarantee  of  earnings,  or  its  equivalent,  and  upon  that  condition 
and  that  only,  sent  its  representative  to  the  meeting  of  the  Trans-Con- 
tinental Association.  The  conclusions  of  the  Inter-state  Commerce  Com- 
mission in  this  respect  are  undeniably  correct,  as  will  further  appear  from 


the  records  of  the  Trans-Continental  Association.  We  quote  from  pro- 
ceedings of  Trans-Continental  Association  at  Chicago,  in  July,  1889, 
only  seven  months  after  the  agreement  granting  to  the  Canadian  line  its 
first  differential  and  while  the  whole  matter  was  fresh  in  the  minds  of 
every  one  connected  with  it.  At  this  meeting  Mr.  Stubbs  stated  his 
views,  and  no  one  will  deny  that  they  fairly  represented  the  views  of  all 
the  American  lines,  in  the  following  language;  I  do  not  think  there  is 
any  one  will  deny  that  Mr.  Stubbs  on  that  occasion  was  the  spokesman 
for  the  American  lines: 

"I  am  not  unwilling  to  place  my  views  on  record,  regarding 
the  position  that  lines,  associated  together  as  we  are,  should  occupy 
in  respect  to  this  business,  and  my  views  are  founded  on  the  prac- 
tice that  we  have  pursued  in  the  past,  and  that  is,  that  each  line 
should  take  and  be  satisfied  with  only  what  it  can  fairly  secure 
upon  an  absolute  equality  of  rate.  The  reasons  for  withdrawing 
from  what  had  been  the  rule  in  the  Trans-Continental  Association, 
were  peculiar  when  we  gave  or  agreed  to  give  the  Canadian  Pacific 
differential  rates.  Not  only  since  the  reorganization  of  this  Asso- 
ciation, but  previous,  our  Association  had  been  made  up  of  lines 
that  presented  varied  characteristics  in  respect  to  their  taking 
power.  There  were  lines  in  the  Association  that  labored  under, 
with  respect  to  some  business,  greater  disadvantages  than  the 
Canadian  Pacific  labored  under, — Lines  who  felt  themselves  en- 
titled to  a  differential  rate,  and  yet  the  opinion  of  the  Association 
was  decidedly  against  it,  and  we  had,  up  to  the  time  that  the 
Canadian  Pacific  was  invited  to  join  the  Association,  set  our  faces 
against  it.  There  is  no  need  of  my  recapitulating  the  circum- 
stances under  which  the.  Trans-Continental  Association  was  reor- 
ganized. Every  one  here  understands  just  as  well  as  I  do  the 
conditions  then  existing  that  moved  us,  and  influenced  us,  to  offer 
the  Canadian  Pacific  a  differential  rate.  The  conditions  have 
changed,  very  materially.  I  believe  they  ought  to  take  their  posi- 
tion in  this  Association  just  as  the  other  lines  do,  be  content  with 
what  they  can  take  on  an  equality  rate.  In  respect  to  certain 
territory  they  have  a  better  line  than  some  others.  Their  line  has 
been  thoroughly  advertised.  Prejudice  against  that  line,  owing 
to  the  idea  that  it  was  a  bad  winter  line,  has  all  been  dissipated. 
The  prejudice  that  some  of  us  worked  against  it  very  materially, 
because  it  was  a  foreign  line,  has  all  been  removed,  if  it  ever 
existed.  It  has  demonstrated  its  ability  to  take  freight  between 
the  Pacific  coast  and  Atlantic  seaboard  in  time  equal  to  the  best 
time  made  by  any  of  the  other  lines.  They  have  demonstrated 
that  they  have  as  good  a  winter  line  as  any  other  line.  They  are 


133 

as  free  from  the  casualties  that  interrupt  and  impede  transporta- 
tion of  any  kind  of  freight,  that  great  prejudice  in  the  minds  of 
shippers,  as  any  of  the  rest  of  us.  They  have  some  advantages 
that  the  rest  of  us  cannot  enjoy."  (Trans-Continental  Association 
Proceedings,  Chicago,  July  23rd,  1889,  pages  96  and  97.) 

And  again,  from  the  Proceedings  of  the  Trans-Continental  Associa- 
tion, March  i8th,  1890;  Mr.  C.  S.  Mellen,  then  representing  the  Union 
Pacific  Railway,  now  President  of  the  Northern  Pacific  Railway  Com- 
pany, speaking  of  the  Canadian  Pacific  differentials,  says: 

"I  believe  they  are  only  a  necessity,  so  long  as  a  line  shows 
itself  weak  and  as  a  bar  to  demoralization.  It  is  a  stand  and 
deliver  policy  and  we  deliver  the  differentials  to  prevent  worse 
trouble." 

The  fact  that  on  former  occasions  the  American  lines  submitted  to 
what  was  believed  by  them  to  be  an  unjust  and  unreasonable  demand 
upon  the  part  of  the  Canadian  line  should  have  no  weight  with  this  Board 
in  determining  its  present  title  or  right  to  the  advantage  it  has  forced 
the  American  lines  to  give  it  in  the  past.  As  well  might  it  be  claimed 
that  a  man  who,  through  weakness  of  judgment,  fear  of  bodily  harm,  or 
of  damage  to  his  name  or  fortune,  once  having  yielded  to  the  unjust 
demands  of  another  person  or  a  superior  power,  has  thereby  established 
a  precedent  which,  regardless  of  his  personal  or  property  rights,  can 
be  pleaded  before  a  Court  as  a  reason  why  he  should  continue  to  submit  to 
the  exaction.  We  repeat  that  the  American  lines  have  heretofore  yielded 
to  the  demands  of  the  Canadian  line  under  protest  and  through  fear  that 
unless  they  did  so  their  property  and  their  business  would  be  destroyed. 
They  have  never  admitted  the  Canadian  line's  title  or  right  to  what  it 
claimed  or  what  has  been  surrendered  to  it.  They  have  not  only  denied 
it,  but  have  sought,  and  were  seeking  at  the  time  the  reference  of  the 
question  to  this  Board  was  proposed  and  accepted,  through  the  law- 
making  power,  the  administrators  of  the  law,  through  Congress,  the 
Treasury  Department  and  the  Inter-state  Commerce  Commission,  to 
restrain  the  Canadian  line  from  all  interference  with  the  business  which 
is  the  subject  of  this  controversy.  Therefore,  we  claim  that  the  question 
submitted,  the  one  we  are  discussing  is  an  original  question  and 
should  come  before  this  Board  de  novo;  that  the  Canadian  line  has  the 
affirmative  of  the  question  and  should  be  required  to  show  its  title  to 
the  claim  for  a  differential  regardless  of  the  past;  that  it  should  be  re- 
quired to  establish  to  the  satisfaction  of  this  Board  that  its  right  to 
engage  in  this  business  is  paramount  to  the  right  of  the  American  lines, 
or,  in  view  of  the  unsubstantial  nature  of  its  showing  in  respect  to  its 


134 

disability,  as  compared  with  conditions  subsisting  with  the  American 
lines,  if  such  a  paramount  right  is  not  inherent  with  the  Canadian  line, 
upon  what  ground  can  it  establish  its  claim  to  an  artificial  advantage 
over  the  American  lines?  While  we  contend  that  constraint  was  the 
dominant  factor  influencing  the  American  lines  to  make  the  original 
concession  to  the  Canadian  line,  there  were  subordinate  considerations 
which  assisted  in  determining  their  choice  between  the  expedient  of  a 
differential  to  that  line  and  the  alternative  of  unrestrained,  unregulated 
competition,  the  effects  of  which  were  so  much  feared.  These  consider- 
ations were: 

FIRST,  that  the  Canadian  line  was  unknown  to  American  shippers. 
It  had  not  been  advertised. 

SECOND,  it  was  believed  that  its  location  through  the  extreme 
northern  part  of  the  continent  would  make  it  no  thoroughfare  through 
the  winter,  and 

THIRD,  that  its  being  a  foreign  line,  having  to  carry  domestic 
traffic  under  customs  regulations,  would  prejudice  it  very  much  in  the 
minds  of  American  shippers. 

FOURTH,  its  own  road,  or  roads  under  its  control,  did  not  pene- 
trate the  United  States  at  any  point. 

FIFTH,  it  had  no  physical  connection  with  American  roads  at  Sumas, 
hence  could  not  make  an  all-rail  line.  All  traffic  from  the  northwest 
and  the  States  south  of  the  Great  Lakes  and  west  of  the  Allegheny 
Mountains  seeking  its  line,  had  to  move  via  Winnipeg. 

The  statement  of  Mr.  Stubbs  at  the  Trans-Continental  Association 
meeting  held  at  Chicago,  July,  1889,  made  in  the  presence,  and  as  we 
have  said,  while  the  recollection  of  the  representatives  of  all  parties  was 
vivid  and  accurate,  for  only  seven  months  had  elapsed  since  the  arrange- 
ment with  the  Canadian  line  had  become  effective,  proves  that  the  first, 
second  and  third  of  the  considerations  cited,  were  those  which  in  point 
of  secondary  influence  induced  the  American  lines  to  experiment  with 
the  differentials  rather  than  encounter  a  disastrous  rate  war.  Speaking 
to  the  proposition  to  reduce  the  differentials  then  in  use  by  the  Canadian 
Line,  Mr.  Stubbs  said — and  here  I  repeat  in  part  what  I  have  just 
quoted,  but  I  do  it  to  .accentuate  this  point: 

"Every  one  here  understands  just  as  well  as  I  do  the  con- 
ditions then" — (seven  months  previous) — "existing  that  moved 
us,  and  influenced  us,  to  offer  the  Canadian  Pacific  a  differential 
rate.  The  conditions  have  changed,  very  materially.  I  believe 
they  ought  to  take  their  position  in  this  Association  just  as  the 
other  lines  do,  be  content  with  what  they  can  take  on  an  equality 
rate.  In  respect  to  certain  territory  (New  England)  they  have  a 
better  line  than  some  others.  Their  line  has  been  thoroughly 


135 

advertised.  Prejudice  against  that  line,  owing  to  the  idea  that 
it  was  a  bad  winter  line,  has  all  been  dissipated.  The  prejudice 
that  some  of  us  worked  against  it  very  materially,  because  it  was 
a  foreign  line,  has  all  been  removed,  if  it  ever  existed." 

The  value  of  the  statement  quoted  as  testimony  in  this  connec- 
tion, consists  not  alone  in  the  time  it  was  made,  but  in  the  circum- 
stance that  it  was  made  during  a  discussion  of  the  Canadian  line's 
differential  among  ourselves;  in  the  closet,  before  representatives  of 
both  sides,  who  were  as  familiar  as  the  speaker  was  with  all  the  facts 
and  circumstances  involved  in  the  discussion  and  could  not  be  deceived 
by  mis-statement — men  who  were  experts  in  transportation  and  had  for 
a  long  time  dealt  with  each  other;  men  who  not  only  understood  the 
spoken  word,  but  could  also  discern  the  unspoken  thought  behind  it. 
Since  that  time  the  Canadian  line  has  obtained  control  of  the  Minne- 
apolis, St.  Paul  &  Sault  Ste.  Marie  Railway,  has  extended  it  from  Min- 
neapolis to  a  junction  with  the  Canadian  Pacific  Railway  at  Portal,  and 
built  a  branch  down  from  Pasqua,  to  meet  it,  thus  shortening  its  route 
from  Minneapolis  to  San  Francisco  by  about  150  miles.  The  effect  of 
this  has  been  to  reverse  the  relative  length  of  the  lines  between  Minne- 
apolis and  San  Francisco  of  the  Canadian  line,  via  Vancouver,  and  the 
Northern  Pacific,  via  Seattle.  Then  the  Canadian  line  was  the  longer 
by  about  91  miles.  The  acquisition  or  control  of  the  Sault  Ste.  Marie 
line  bettered  its  relations  to  the  traffic  between  San  Francisco  and  all 
the  Northwestern  States,  and  the  States  south  of  the  Great  Lakes  and 
west  of  the  "Alleghenies."  This  improvement  is  not  to  be  measured  by 
the  reduced  length  of  haul;  that  is  the  smallest  part  of  it.  The  Min- 
neapolis terminus,  the  getting  upon  an  equality  with  the  Northern 
Pacific  in  respect  to  a  direct  connection  with  the  great  railroad  systems 
leading  from  the  south,  southwest  and  southeast,  and  terminating  at 
Minneapolis,  was  of  far  greater  importance  than  the  mere  reduction 
of  length  of  line.  It  has  since  extended  its  line  from  Mission  Junction, 
B.  C,  to  Sumas,  made  a  traffic  agreement  with  the  Seattle  &  Interna- 
tional Ry.,  thus  practically  making  physical  connection  with  the  rails 
of  the  Northern  Pacific  over  which  and  its  connections,  it  can  reach 
all  Washington,  Oregon  and  California  by  rail.  Then  it  could  reach 
Puget  Sound  points,  Portland  and  San  Francisco  by  water  only,  from 
Vancouver.  It  has  demonstrated  that  being  a  foreign  line,  having  to 
submit  to  customs  regulations  is  not  an  insurmountable  obstacle  to  its 
use  by  American  shippers.  It  relieves  the  shipper  of  all  trouble  arising 
therefrom.  It  has  proven  to  be  a  good  winter  line,  having  never  been 
obstructed  by  snow,  while  in  1889  the  lines  via  Ogden — the  short  line — 
were  closed  for  weeks  by  a  snow  blockade  in  the  Sierra  Nevadas.  In 
1897  the  "Sunset"  line  was  stopped  for  several  weeks  by  yellow  fever. 


136 

In  1898  it  is  partially  so  and  we  do  not  know  what  day  the  quarantine 
will  be  closed  down  against  us  and  we  will  be  prevented  from  sending 
any  goods  over  that  line  ("Sunset  Gulf"  or  "Sunset  all-rail").  The 
circumstance  that  it  was  a  broken  line  did  not  enter  into  the  considera- 
tion of  the  American  lines  as  factors  of  influence.  How  could  it  have 
done  so  when  among  the  American  lines  there  were  several  lines  pre- 
senting similar  features  in  this  respect?  The  question  of  time  required 
to  move  the  traffic  did  not  receive  consideration.  How  could  it  when 
the  respective  abilities  of  the  several  American  lines  in  this  regard  varied 
widely?  To  have  conceded  the  Canadian  line  differentials  on  these 
grounds  would  have  been  to  ignore  similar  conditions  among  ourselves. 
It  must  be  manifest,  therefore,  that  the  subordinate  factors  of  influence, 
those  which  were  confessed  in  justification  of  the  act,  were  those  con- 
ditions and  circumstances  which  we  have  named  and  they  have  changed 
so  materially  as  to  lose  whatever  weight  they  ever  had. 

Shall  I  proceed?  This  is  a  good  stopping  point,  but  I  will  continue 
if  the  Board  so  desires. 

ARBITRATOR  WASHBURN— We  will  now  adjourn,  until  half- 
past  2  o'clock. 


Afternoon  Session,  October  14,  1898,  2:30  P.  M. 
The  meeting  convened  pursuant  to  adjournment. 

ARBITRATOR  WASHBURN— Mr.  Stubbs  will  proceed  with  his 
argument,  if  he  is  ready. 

MR.  STUBBS — Now,  if  it  please  the  Board,  we  submit  that  so  far 
we  have  met  the  Canadian  line  on  its  chosen  grounds,  its  allegations  of 
disability  against  its  own  line  by  contrast  with  the  American  lines,  its 
plea  that  the  American  mixed  lines  have  alternative  all-rail  lines,  its 
reference  to  the  customs  of  other  lines  in  other  territories  as  valid 
precedents,  and  its  appeal  to  its  arrangement  with  the  Trans-Continental 
lines  in  1888.  We  think  that  all  of  these  contentions  have  been  shown 
to  be  insufficient,  not  one  of  them  has  been  established,  not  one  of  them 
furnishes  a  substantial  foundation  for  the  claim  of  the  Canadian  line 
to  the  right,  an  equitable  right,  to  an  artificial  advantage  over  the  Amer- 
ican lines,  in  order  to  share  San  Francisco's  trade.  Then,  whence  is 
the  alleged  right  derived? 


137 

The  Canadian  Pacific  was  not  created  for  the  purpose  of  doing  San 
Francisco  business.  It  is  the  creature  of  a  foreign  state.  Its  sovereign 
could  confer  upon  it  no  title,  right  or  privilege,  within  the  borders  of 
the  United  States,  or  with  respect  to  the  domestic  commerce  of  the 
United  States.  It  is,  as  has  been  said  by  a  prominent  writer  on  the 
subject,  a  political  and  military  enterprise,  conceived  and  executed  to 
politically  unite  the  several  Provinces  comprising  the  Dominion  of 
Canada,  to  cause  these  Provinces  to  trade  among  themselves  instead  of 
trading  with  the  United  States;  to  serve  as  a  line  of  military  communi- 
cation between  the  different  parts  of  the  Dominion,  to  promote  the 
scheme  of  British  Imperial  confederation.  On  account  of  its  political 
and  military  objects,  it  was  munificently  aided  by  the  Dominion  Gov- 
ernment of  Canada.  To  the  extent  that  it  was  and  is  a  political  and  mili- 
tary enterprise,  its  construction  was  and  its  operation  is  not  amicable 
toward  the  United  States  Government.  In  war  it  is  as  powerful  an 
engine  of  offense  or  defense  as  in  peace  it  is  a  potential  agent  in  develop- 
ing and  promoting  the  commercial  and  industrial  resources  of  the  Nation. 
In  war  it  is  a  menace  to  the  American  Nation;  in  peace  its  primary 
object  is  to  develop  the  resources  of  Canada  and  to  promote  British 
trade  and  British  commerce  as  against  all  other  Nations,  and  against  the 
United  States  in  particular.  The  object  of  its  construction  was  not 
that  of  developing  or  promoting  the  commerce  of  the  United  States.  Its 
participation  in  that  trade  is  merely  incidental.  It  is  not  subject  to  the 
laws  of  the  United  States.  It  does  not  employ,  to  any  considerable 
extent,  American  labor.  No  considerable  part  of  its  line  is  taxable  in 
the  United  States.  Did  the  Canadian  line  make,  build,  extend  or  sup- 
port the  trade  of  San  Francisco  and  thus  acquire  a  right  to  possess  and 
enjoy  it?  It  has  had  no  part  in  creating  San  Francisco's  trade.  It  in 
no  sense  contributes  to  it;  does  not  promote  nor  sustain  it.  On  the 
contrary,  the  purpose  and  effect  of  its  operation  and  construction  was 
and  has  been  to  divert  from  and  diminish  the  trade  of  San  Francisco.  One 
of  the  primary  objects  of  its  building  was  to  take  from  San  Francisco 
its  trade  with  British  Columbia  and  give  it  to  Montreal  and  other  Cana- 
dian cities.  In  part,  its  object  was  to  divert,  and  it  has  succeeded  in 
diverting  from  San  Francisco,  a  very  considerable  amount  of  Oriental 
trade  that  formerly  passed  outward  and  inward  through  the  Golden 
Gate.  It  has  given  nothing  in  exchange  for  what  it  has  taken  from  San 
Francisco.  It  has  not  had,  and  has  not  now,  nor  can  it  in  the  future 
have,  anything  to  give.  It  has  opened  no  new  territory  to  the  San  Fran- 
cisco merchants,  nor  to  the  California  producer.  This  practically  closed 
territory,  formerly  opened  to  the  San  Francisco  merchant  its  entire  ter- 
ritory throughout  the  length  of  its  line,  is  closed  to  the  San  Francisco 
merchant  as  effectively  as  it  would  be  were  the  Dominion  Government 
and  the  United  States  at  war.  On  the  other  hand,  the  American  lines 


•38 

are  creatures  of  the  United  States.  The  very  object  of  their  creation 
was  to  develop  and  promote  the  internal  commerce  of  the  United  States, 
the  industries  and  resources  of  the  several  States  which  they  traverse,  in 
order  that  the  people  of  this  American  Union  might  be  as  free  from 
industrial  and  commercial  dependence  upon  foreign  states,  as  they  are, 
and  always  shall  be,  free  from  political  subordination  to  other  states. 
They  were  born  of  the  necessities  of  our  people.  They  rank  among  the 
greatest  industries  of  the  Nation.  They  are  the  most  potential  factors  in 
the  industrial  progress  of  the  country.  They  are  citizens  of  the  United 
States.  Again,  the  American  lines  have,  for  the  most  part,  created  a 
trade  for  San  Francisco.  They  have  developed,  promoted  and  sustained 
it.  The  duty  of  sustaining  it,  of  further  promoting  and  increasing  it, 
also  falls  upon  and  will  forever  remain  with  the  American  lines  without 
aid  or  comfort  from  our  Canadian  friends. 

In  a  broad  sense,  carriers,  and  especially  railroads,  may  be  classed 
among  the  most  productive  industries,  because  they  are  among  the  most 
efficient  agents  of  productive  and  manufacturing  industries.  On  the 
American  continent  they  have  superseded  the  pioneer,  have  pushed 
beyond  the  borders  of  civilization  out  into  the  wilderness  and  the  desert; 
they  have  been  followed,  not  preceded,  by  the  husbandman.  Farm 
houses,  villages,  towns  and  cities  with  their  varied  manufacturing  indus- 
tries, have  sprung  up  in  their  tracks.  This  is  peculiarly  true  of  the  terri- 
tory, the  supplying  of  which  has  made  San  Francisco  the  metropolis 
of  the  Pacific  Coast.  Her  chief  trade  is  in  distributing  supplies  to,  and 
in  distributing  the  products  of,  the  States  of  California,  Nevada  and 
Utah,  and  the  Territories  of  Arizona  and  New  Mexico.  That  is  her 
chief  trade.  The  merchandise  which  she  gathers  from  all  the  States 
east  of  the  Rocky  Mountains  is  for  the  most  part  distributed  over  the 
States  and  Territories  I  have  named.  The  product  of  the  field,  of  the 
forest  and  of  the  mines,  which  she  ships  to  the  east  in  exchange  for 
this  merchandise,  are  for  the  most  part  the  products  of  the  States  and 
Territories  named.  It  is  this  merchandise  and  these  products,  the  trans- 
portation of  which  is  the  subject  of  this  controversy.  The  opening  of 
this  consuming  and  producing  traffic  to  San  Francisco,  the  agencies 
which  made  it  possible,  which  have  developed,  promoted  and  sustained  it, 
are  the  American  railroads.  Whose  was  the  courage,  the  daring,  the 
skill,  the  perseverance  to  overcome  what  was  conceived  to  be  insurmount- 
able obstacles  to  railroad  building  presented  by  mountains  and  deserts? 
Who  demonstrated  the  possibility  of  binding  the  Pacific  and  Atlantic 
Coasts  of  North  America  with  bands  of  steel  at  the  risk  of  fortune  and 
of  fame?  It  was  the  builders  of  the  American  lines.  Who  opened  the 
productive  valleys  of  California  that  furnish  over  75  per  cent  of  the 
trade  of  San  Francisco?  Who  climbed  the  Sierra  Nevadas  and  the 
Rocky  Mountains,  revealing  to  the  world  their  treasures  of  wealth  of 


field,  forest  and  mine?  It  was  the  builders  of  the  American  Railroads. 
The  trade  of  San  Francisco  is  of  their  creation.  Without  their  agency 
in  the  development,  promotion  and  sustainment  of  the  productive  indus- 
tries of  the  United  States,  territory  whose  trade  is  tributary  to  it,  it 
would  have  speedily  relapsed  after  the  gold  excitement  of  1849  and  the 
early  5o's,  into  an  inconsequential  seaport  town  whose  chief  trade  with 
the  eastern  states  consisted  in  distributing  supplies  to  the  cattle  ranches 
and  carrying  their  products — hides,  wool  and  tallow,  to  New  York,  for 
which  an  occasional  sailing  vessel  around  Cape  Horn  would  amply 
suffice. 

Permit  us  to  illustrate  by  referring  to  the  growth  of  California  which 
is  the  principal  source  of  San  Francisco  trade: 

In  1870,  one  year  after  the  opening  of  the  first  Pacific  railroad  through 
line,  the  population  of  the  State  of  California  was  560,000.  In  1890,  it 
was  1,280,130. 

STATE    OF    CALIFORNIA. 

In  1870.  In  1890. 

Population 560,000  1,280,130 

Valuation  of  Property $638,000,000  $2,533,000,000 

Imports $15,900,000  $48,750,000 

Exports $13,365,000  $35,960,000 

Manufactures   $66,500,000  $213,400,000 

Number  of   Farms   23,724  52,894 

Value  of  Farm  Products..   $49,856,000  $87,033,000 

Railroad  Mileage  (miles) .  .                 925  4,328 

What  was  the  principal  agent  in  this  remarkable  improvement?  The. 
answer  is  found  in  the  fact  that  in  1870  the  railroad  mileage  in  Cali- 
fornia was  925  miles.  In  1890  it  was  4,328,  and  this  increased  railroad 
mileage  was  almost  wholly  constructed  and  has  been  operated  by  the 
American  lines  who  are  parties  to  this  controversy.  The  Canadian  line  in 
no  sense  and  in  no  degree  contributed  to  it. 

Is  it  apparent  from  this  showing  that  the  Canadian  line  has  any 
equitable  ground  for  claiming  that  its  right  to  the  smallest  part  of  San 
Francisco's  trade  is  paramount  to  the  rights  of  the  American  lines  to 
do,  and  enjoy,  the  whole  of  San  Francisco's  business  with  other  points 
in  the  United  States?  Is  its  competition  desirable  and  helpful;  promo- 
tive  of  trade?  Is  its  presence  in  the  San  Francisco  markets  welcome 
to  the  San  Francisco  merchant?  We  aver  that  it  does  not  introduce  any 
necessary  element  of  helpful  competition  which  promises  a  freer  and 
fuller  exchange  of  commodities  between  San  Francisco  and  its  eastern 
markets  of  supply  and  consumption.  A  single  glance  at  the  map  will 


140 

prove  that  San  Francisco  is  served  by  a  sufficient  number  of  inde- 
pendent American  lines,  not  only  to  handle  all  her  freight,  but  to  do  so 
if  it  were  increased  many  times  over  its  present  volume.  I  refer  to  these 
lines  out  via  Portland,  Seattle  and  Tacoma;  out  via  San  Diego,  not 
touching  the  Central  Pacific;  besides  the  Central  Pacific  and  Southern 
Pacific  lines  and  added  to  these,  the  Pacific  Mail  Steamship  Company,  the 
original  line,  in  connection  with  the  Panama  route,  and  the  vessels  of 
Cape  Horn. 

The  history  of  the  operation  of  these  lines  proves  beyond  question 
the  impossibility  of  any  combination  without  the  competition  of  the 
Canadian  line  which  would  not  be  possible  with  it.  The  public  interest 
is  fully  protected  in  this  respect  by  the  natural,  uncontrollable,  competi- 
tion of  the  American  lines,  so  that  the  Canadian  line  cannot  find  any 
substantial  foundation  for  its  claim  of  right  to  share  in  this  traffic  in  the 
assertion  that  its  services  are  necessary  or  desired  by  San  Francisco 
merchants  either  to  move  the  traffic  or  maintain  helpful  competition. 
Moreover,  the  volume  of  the  traffic  is  not  so  great  as  to  tax  the  capacity 
of  any  of  the  American  lines  to  move  it  safely  and  expeditiously,  while 
there  are  six  of  the  American  lines,  all-rail  and  mixed  water-and-rail, 
over  which  it  can  move  to  and  from  the  State  of  California,  under  as 
favorable  conditions,  approximately,  as  it  can  move  over  the  Canadian 
line,  and  we  contend  that  it  is  not  equally  just  and  right  to  all  con- 
cerned to  require  these  American  lines,  or  any  one  of  them,  under 
such  circumstances,  to  surrender,  through  the  device  of  a  differential 
or  any  other  expedient,  any  portion  of  this  trade  which  may  otherwise 
seek  their  line.  We  are  talking  about  right,  now.  On  the  contrary, 
to  require  all  or  any  of  these  American  lines  to  surrender,  under  cir- 
cumstances such  as  have  been  described,  any  portion  of  their  traffic, 
to  the  Canadian  line,  is  to  declare  that  their  right  is  subordinate;  that 
the  right  of  the  Canadian  line  is  paramount  in  respect  to  said  traffic. 
Such  a  requirement  is  essentially  inequitable,  unequal,  partial  and  unfair. 

In  support  of  our  averments  that  the  Canadian  line  does  not  con- 
tribute to  the  up-building  of  San  Francisco  trade,  but,  rather,  that  its 
purpose  and  effect  has  been  to  divert  and  diminish  that  trade,  and  that 
its  competition  is  not  promotive  of  San  Francisco's  trade  interest,  we 
beg  leave  to  file  with  the  Board  certified  copies  of  the  following  docu- 
ments : 

("Exhibit  A")  Report  to  Chamber  of  Commerce  of  San  Fran- 
cisco of  Committee  on  Withdrawal  of  Bonding  Privilege  of  Cana- 
dian Pacific  Railway,  March,  1898. 

I  am  not  going  to  take  your  time  by  reading  all  this,  just  a  few  para- 
graphs. 


"The  Canadian  Pacific  Railroad  diverts  from  our  city  a  very 
large  part  of  the  constantly  growing  trade  with  China,  Japan  and 
Australia,  which  but  a  few  years  ago  came  to  our  port." 

Then  they  give  some  examples. 

"In  fact,  this  road  is  engaged  in  building  up  Vancouver  with 
trade  which  formerly  came  to  us,  and  we  are  helping  them." 

That  shows  how  the  Americans  look  at  this  thing. 

"We  allow  only  American  vessels  to  carry  cargoes  between 
Atlantic  and  Pacific  ports,  or,  in  fact,  between  any  of  our  domestic 
ports,  but  a  foreign  railroad  is  allowed  to  compete  for  this  busi- 
ness, and  is  more  favored  by  us  than  our  own  lines,  as  we  are 
obliged  to  comply  with  our  laws,  while  we  do  not  put  this 
restraint  on  the  foreigner." 

Is  that  Jingoism?    It  is  the  Chamber  of  Commerce  of  San  Francisco. 

"Our  sense  of  justice  demands  that  a  foreign  road  should  not 
be  treated  with  more  favor  or  consideration  than  a  domestic 
road." 

And  then  they  go  on  and  pass  resolutions,  going  to  an  extent  that 
we  do  not  desire,  asking  that  the  bonding  privilege  be  canceled,  and 
that  they  be  forbidden  or  prevented  by  that  enactment  of  law  from  doing 
any  of  this  business.  We  take  no  such  position  with  them.  We  are 
not  shaking  the  "bloody  s'hirt"  and  saying  "you  shall  not  come  into 
this  country."  We  are  simply  contending  that  you  must  come  in  on 
an  equality  with  us;  that  "you  do  not  possess  a  better  right  nor  a 
superior  title  to  one  pound  of  this  freight  than  we  possess.  You  are 
welcome;  we  are  glad  and  willing  to  work  with  you,  if  you  will  come 
in  on  an  equality  of  rates." 

Anticipating  that  it  may  be  said,  as  was  intimated  in  reference  to 
another  Exhibit,  which  I  shall  now  put  in,  that  this  was  procured  by  rail- 
road efforts,  I  wish  to  say,  in  the  first  place,  that  no  railroad  man  in 
San  Francisco  or  from  anywhere,  that  I  know  anything  about,  had  any- 
thing to  do  with  that.  The  inspiration  of  that,  so  far  as  my  knowledge 
goes,  was  from  Captain  W.  L.  Merry,  at  the  time  Secretary  of  the  Cham- 
ber of  Commerce;  the  man  who,  for  years,  has  been  the  agent  of  Nica- 
ragua Canal,  and  has  felt  himself  obliged  to  antagonize  the  railroads 
because  he  thought  they  were  inimical  to  that  interest.  He  is  now  our 
Minister  to  the  Central  American  Republic  of  Nicaragua. 


1 42 

(''Exhibit    B")    Letter   of   San   Francisco   Chamber  of   Com 
merce,  by   its   President,  addressed  to  the   Boston   Chamber  of 
Commerce  under  date  of  August  29,  1898. 

Now,  if  that  document  is  susceptible  to  the  criticism  or  the  imputation 
made  yesterday  with  reference  to  another  document,  let  me  call  your 
attention  to  the  fact  that  it,  and  other  petitions  to  Congress  that  I  shall 
present  to  you,  originated  in  organized  bodies  of  business  men,  which, 
in  respect  to  all  the  commercial  interests  of  their  cities,  are  the  mouth- 
piece of  the  people.  To  accentuate  this  I  call  your  attention  to  "Exhibit 
B,"  which  I  have  just  described. 

The  Boston  Chamber  of  Commerce  desiring  to  have  its  views  con- 
cerning the  Inter-national  treaty  which  is  now  the  subject  of  negotia- 
tion between  a  Joint  Commission  composed  of  representatives  of  the 
Dominion  of  Canada  and  of  the  United  States,  sent  a  member  out  to 
San  Francisco  for  the  purpose  of  winning  the  Chamber  of  Commerce's 
influence  in  favor  of  that  program.  This  is  a  letter  dated  August  29th; 
it  is  a  copy,  but  certified. 

"Boston  Chamber  of  Commerce, 

Gentlemen:  A  short  time  ago  Mr.  Osborne  Howes  of  your 
Chamber  gave  a  very  interesting  and  instructive  address  to  us 
on  trade  relations  and  reciprocity  with  Canada,  and  in  the  course 
of  his  remarks  he  spoke  of  the  Fishing  question,  Klondike  Mining 
laws,  Boundary,  Fishing  and  Navigation  of  the  Great  Lakes,  Beh- 
ring  Sea  Sealing  matters,  Alaskan  boundaries,  &c.,  &c.,  but  the 
question  of  transportation  in  bond  by  the  Canadian  Railroads  was 
not  commented  on.  A  resolution  was  adopted  by  the  meeting 
expressing  the  hope  that  the  most  friendly  relations  might  exist 
between  the  two  countries  and  that  the  Commission  would  make 
a  satisfactory  solution  of  the  difficulties.  After  the  meeting  was 
over,  in  conversation  with  one  of  our  trustees  the  question  of  the 
bonding  privilege  of  the  Canadian  Pacific  Railroad  was  referred 
to  and  Mr.  Howes  expressed  himself  quite  strongly  in  favor  of 
the  Canadian  Pacific  Railroad  looking  at  it  from  the  way  it 
affected  New  England  in  her  trade  with  the  Middle  west.  Mr. 
Howes  was  then  informed  that  a  Committee  of  this  Chamber  had 
spent  some  time  investigating  this  question  last  spring  and  that 
our  views  so  far  as  the  bonding  question  was  concerned  were  very 
plain.  That  you  may  not  by  any  chance  misunderstand  us  we 
write  so  that  you  may  clearly  know  our  position  on  this  subject. 
We  enclose  herewith  copies  of  the  report  of  the  Committee  which 
investigated  this  matter.  We  call  particular  attention  to  the  quo- 
tation from  the  6th  Inter-state  Commission  Report  for  1892, 


143 

wherein  the  Commission  say  that  'No  such  advantage  exists  or 
can  be  given  to  the  people  of  this  country  on  the  Pacific  Coast 
as  is  afforded  the  people  of  our  Western  and  Northwestern  States/ 
Why  should  this  advantage  be  given  when  we  do  not  get  a  com- 
pensating benefit?  It  is  the  policy  of  the  Canadian  Pacific  Rail- 
road to  build  up  Vancouver  and  Canada  and  divert  the  trade  which 
would  otherwise  come  to  and  through  America.  It  is  also  the 
policy  of  this  railroad  to  demand  a  differential  to  San  Francisco. 
This  may  seem  to  be  an  advantage  to  us,  but  in  the  long  run  it 
is  not,  for  it  creates  considerable  unrest  and  disturbance  in  freight 
rates  which  would  otherwise  be  firmly  maintained.  This  Cana- 
dian Road  demands  the  right  to  quote  rates  10  per  cent  below 
those  of  the  American  lines  without  regard  to  the  fairness  and  so 
obliges  the  American  lines  to  collect  n  per  cent  more  than  the 
Canadian  Pacific.  It  does  not  base  its  rates  on  the  cost  of  trans- 
portation, but  says  whatever  rates  the  American  lines  make,  we 
will  cut  them  10  per  cent.  There  is  not  justice  or  reason  in  this. 
We  trust  this  bonding  privilege  will  not  be  perpetuated  or  placed 
out  of  the  reach  of  legislation  by  treaty,  for  should  such  an  at- 
tempt to  be  made  it  may  cause  opposition  to  a  treaty  that  might 
otherwise  be  beneficial." 

That  is  "Exhibit  B." 

("Exhibit  C")  "Petition  of  Manufacturers,  and  Producers  As- 
sociation of  California — Terms  of  Re-entry  of  Goods  into  the 
United  States." 

I  will  not  read  them,  preferring  not  to  take  your  time.  These  are 
all  addressed  to  Congress,  or  to  our  representatives  in  Congress. 

ARBITRATOR  WASHBURN— You  understand  we  are  here  to 
listen  to  anything  you  desire  to  say. 

MR.  STUBBS— I  did  not  want  to  take  your  time,  but  thought  that 
you  preferred  to  go  over  these  in  your  chambers. 

ARBITRATOR  DAY — If  you  do  not  wish  to  read  them  you  may 
just  briefly  state  what  they  are. 

MR.  STUBBS— Well,  this  exhibit  which  I  have  just  referred  to,  the 
Petition  of  Manufacturers  and  Producers  of  California,  after  the 
''Whereas,"  says: 

"Now,  therefore,  we,  your  petitioners  do  humbly  pray  you  to, 
without  delay,  pass  a  law  which  shall  take  away  from  and  deprive 
the  Canadian  Pacific  Railway,  and  all  other  railways  or  trans- 
portation lines  of  any  sort  or  nature,  of  any  and  all  right  to 


144 

transport  goods,  or  passengers  from  any  one  part  of  the  United 
States  to  any  other,  or  further  terms  of  re-entering  into  the  United 
States  than  those  which  exist  and  are  applicable  to  passengers 
and  goods  coming  into  the  United  States  from  a  foreign  country." 

ARBITRATOR  WASHBURN— That  is  from  whom? 

MR.  STUBBS — The  Manufacturers  and  Producers  Association  of 
California,  with  the  seal  of  the  Association,  signed  by  James  W.  Kerr, 
President.  You  see  this  goes  further  than  we  do.  We  do  not  wish  to 
exclude  them  from  this  country. 

I  file  next,  as  "Exhibit  D,"  two  resolutions  of  the  Chamber  of  Com- 
merce, Sacramento,  ''Protection  of  American  Commerce,"  under  date  of 
March  18,  1898. 

You  will  observe  these  are  all  addressed  to  the  Congress  of  the  United 
States.  "Exhibit  D"  is  as  follows: 

"Resolved,  by  the  Sacramento  Chamber  of  Commerce  that 
our  Representatives  in  Congress  be  urgently  requested  to  favor 
such  legislation  as  will  protect  American  Commerce  and  give  to 
American  labor  and  capital,  ample  protection  against  this  unfair 
foreign  competition."  (Signed  by  its  President  and  by  "Cole- 
man,  Secretary.") 

I  file  a  resolution  of  Chamber  of  Commerce  of  Los  Angeles,  "Protec- 
tion of  American  Commerce,"  as  "Exhibit  E." 

"The    Los   Angeles   Chamber  of   Commerce,  March   2nd,    1890."- 
(before  we  ever  thought  of  this  arbitration.) — 

"Whereas,  it  has  been  represented  to  this  Chamber  that  the 
Canadian  Pacific  Railway  by  reason  of  the  aid  received  from  the 
Government  of  Canada,  and  by  its  exemption  from  the  provisions 
of  the  Inter-state  Commerce  law  of  the  United  States,  has  great 
advantage  over  the  American  Railroads,  and 

Whereas,  it  is  understood  that  the  Canadian  Pacific  Railway 
is  using  the  advantages  so  enjoyed  by  it,  in  aid  of  the  Commerce 
and  interests  of  Canada,  and  against  those  of  the  United  States, 
and  especially  of  the  Pacific  Coast  States,  therefore  be  it, 

Resolved,  that  our  Senators  and  Representatives  in  Congress 
be  and  they  are  hereby  respectfully  requested  to  enact  such  legis- 
lation as  will  deprive  the  Canadian  Pacific  Railway,  and  all  other 
foreign  railways  of  any  privileges  tJhat  give  them  an  undue  advan- 
tage over  the  railroads  of  the  United  States. 


145 

Resolved,  that  a  copy  of  these  resolutions  be  transmitted  to 
our  Senators  and  Representatives  in  Congress."  (Signed  by  "Wig- 
gins, Secretary,"  with  the  seal  of  the  Chamber  under  date  of 
August  26th.) 

Mr.  McCloskey,  the  Assistant  Secretary  of  the  Pacific  Coast  Hard- 
ware and  Metal  Association,  forwarded  to  our  Traffic  Manager  a  copy 
of  the  resolutions  adopted  at  a  meeting  of  the  various  jobbing  lines  of  San 
Francisco,  an  original  copy  of  which  was  sent  to  Sir  Wm.  C.  Van  Home, 
President  of  the  Canadian  Pacific  Road,  and  a  duplicate  forwarded  to 
Mr.  Robt.  Kerr,  Traffic  Manager  of  the  same  System.  I  do  not  know 
whether  that  is  the  same  that  Mr.  Kerr  referred  to  or  not.  I  will  file 
it  with  the  Board  as  "Exhibit  F." 

I  file  these  documents  not  representing  the  desire  of  the  American 
lines  that  the  Canadian  line  shall  be  completely  shut  out  from  our  trade. 
We  do  not  believe  in  that,  because  the  Board  must  have  seen  from  the 
presentation  that  we  have  so  far  made,  that  all  we  are  contending  for  is 
equality; — that  we  have  met  the  Canadian  Pacific  upon  its  own  ground 
and  disputed  its  alleged  claims  of  disability; — that  we  are  not  allowed, 
for  considerations  of  law,  or  the  general  policy  affecting  this  whole  ter- 
ritory, which  is  more  binding  on  us  than  law,  I  must  say,  because  it 
affects  directly  our  own  interest — to  partition  this  traffic  among  our- 
selves. We  cannot  say  to  the  Northern  Pacific,  "You  shall  have  so  much 
of  this  business,"  nor  to  the  Texas  &  Pacific,  "You  are  entitled  to  this 
much,"  nor  to  the  Oregon  Short  Line,  "You  shall  have  this  percentage." 
We  cannot  do  that.  There  is  nothing  left  for  us  but  equality  of  rates. 
That  is  the  traditional  policy,  and  it  is  an  outgrowth  of  a  careful  study 
of  the  situation  by  the  experts  that  are  employed  to  manage  these  roads 
from  the  Presidents  down  to  the  Traffic  Managers  and  General  Freight 
Agents,  and  therefore  it  must  be  taken  as  conclusive  that  business  con- 
siderations, the  financial  considerations,  entering  into  the  general  policy 
of  this  traffic,  are  very  weighty.  It  leaves  the  Northern  Pacific  and  the 
Great  Northern  to  say  we  will  do  all  we  can  at  equal  rates  with  you  and 
take  that,  not  and  be  satisfied,  but  with  the  consciousness  that  we  have 
done  the  best  we  can. 

I  might  as  well  here  touch  on  something  that  has  occurred  to  me 
several  times.  It  must  be  manifest  to  this  Board  that  if  the  Canadian 
line  is  entitled  to  a  differential  on  San  Francisco,  these  lines  (indicating 
on  map)  are  entitled  to  a  differential  on  Vancouver.  We  have  not  asked 
;t.  Mr.  Kerr  says: 

"The  question  of  Canadian  roads  being  permitted  to  partici- 
pate in  American  traffic  has  been  a  subject  brought  under  fre- 
quent discussion  and  in  some  quarters  strong  efforts  have  been 
10 


146 

made,  through  the  press  and  by  various  other  means,  to  preju 
dice  the  rights  and  privileges — "rights  and  privileges" — of  Cana- 
dian roads  in  that  respect,  the  motive  being  to  work  up  public 
opinion  to  a  point  that  will  enable  our  opponents  to  procure  legis- 
lative action  against  us,  in  order  that  the  Canadian  roads  be  re- 
moved from  the  field  as  competitors  in  American  traffic." 

What  if  it  is  true?  Is  it  not  the  inalienable  right  of  every  American 
citizen  or  of  every  Englishman  to  agitate  a  question  that  concerns  his 
personal  or  property  rights;  to  seek  for  protection  whether  to  his  per- 
son or  to  his  property;  to  reform  laws  that  operate  adversely  to  his 
interest?  If  we  had  done  what  is  claimed,  have  we  done  anything  differ- 
ent than  every  Englishman  that  felt  himself  suffering  from  abuses  since 
the  time  the  charter  was  wrested  from  King  John  has  done?  Is  it  not, 
as  I  have  stated,  our  inalienable  right?  This  question  has  already  become 
a  public  question.  That  is  evidenced  by  the  exhibits  I  have  submitted 
and  partially  read.  I  may  say  that  it  has  become  a  national  question 
because  it  is  treated  of  in  the  Annual  Reports  of  the  Inter-state  Com- 
merce Commission  and  in  the  Passenger  Differential  case  was  made  the 
subject  of  an  inquiry  by  the  Inter-state  Commerce  Commission,  in  the 
City  of  Chicago.  It  will  continue  to  be  a  public  question  and  a  national 
question  just  as  long  as  the  Cross  of  St.  George  flies  above  the  Cana- 
dian line,  guaranteeing  to  it  the  support  and  protection  of  the  greatest 
and  most  aggressive  commercial  power  on  earth;  just  as  long  as  Old 
Glory  waves  in  beauty  over  the  American  lines,  symbolizing  liberty  and 
equality  to  every  one  beneath  its  folds;  just  so  long  as  this  alien  comes 
into  this  country  and  demands  that  in  respect  to  domestic  commerce  it 
shall  have  an  advantage,  not  equal  rights,  but  that  it  shall  have  an  advan- 
tage over  domestic  carriers.  In  that  demand  it  assails  the  very  genius 
of  our  institutions.  It  is  an  insult  to  our  flag  which  not  only  symbolizes 
but  guarantees  liberty  and  equality  to  all.  Is  that  jingoism?  Talk  of 
business  interest  or  commercial  instinct — commercial  instinct  is  British 
instinct.  The  American  public  is  just  waking  up  to  the  significance  of 
the  attitude  of  our  adversaries.  Exacting  as  it  may  be  to  the  American 
railroads,  unreasonable  as  it  may  seem  to  us  at  times  to  be  in  dealing 
with  us,  there  is  no  doubt  that  the  body  politic  means  to  be  just,  and 
when  it  becomes  a  matter  of  public  knowledge  that  American  lines  in 
respect  to  domestic  business  are  at  the  mercy  of  foreign  lines,  you  may 
as  well  attempt  to  smother  free  speech  or  to  muzzle  the  press  as  to  pre- 
vent its  becoming  a  political  issue  that  will  spread  all  over  this  country 
and  overwhelm  even  New  England  with  a  tide  of  patriotism  that  will 
coerce  Congress  to  legislate  to  protect  the  American  lines;  to  secure  to 
them,  at  least,  equality  of  privilege  with  the  Canadian  lines,  and  that, 
if  it  pleases  this  Honorable  Board,  is  all  we  demand  and  all  we  ask. 


147 

Now,  having  treated  of  the  alleged  disabilities  that  the  Canadian 
line  works  under,  as  contrasted  with  the  American  lines,  and,  as  we  be- 
lieve, disposed  of  them, — found  them  to  be  insufficient,  is  it  not  manifest 
that  behind  or  beneath  all  the  reasons  advanced  by  the  Canadian  line  in 
support  of  its  contention,  and  which  we  have  reviewed,  there  lies,  uncon- 
fessed,  a  reason  which  predominates,  a  reason  which,  though  not  publicly 
avowed,  underlies  the  original  demand  of  the  Canadian  line,  and  has 
since  provided  its  only  support?  We  aver  that  there  is  such  a  reason, 
that  it  subsists  in  our  adversary's  unavowed  but  conscious  power  to 
injure  us  without  fear  of  retaliation;  in  its  ability,  without  any  material 
damaging  consequence  to  itself,  to  make  the  subject  business  valueless 
to  the  American  lines,  and  with  it  the  business  of  all  Pacific  Coast  Ter- 
minals, and  the  business  of  other  intermediate  dependent  points,  and 
we  solemnly  aver  that  this  power  to  work  harm  to  the  Amer- 
ican lines,  constitutes  the  sole  ground  upon  which  rests  the  Cana- 
dian line's  claim  of  right  to  share  in  San  Francisco's  carrying  trade; 
the  only  ground  upon  which  its  claim  for  differentials  is  founded.  If 
proof  of  this  averment  is  required,  further  than  that  which  is  found  in 
the  universal  belief  of  all  practical  railroad  men,  not  only  with  respect 
to  the  claim  of  the  Canadian  line,  but  of  all  similar  claims  by  other  car- 
riers, alien  or  citizen,  let  this  test  be  applied:  Build  at  Vancouver,  the 
Pacific  Coast  terminus  of  the  Canadian  line,  a  city  of  the  population, 
wealth  and  enterprise  of  San  Francisco,  supported  by  a  territory  as  large 
and  productive  as  the  State  of  California.  Give  the  American  lines  as 
large  a  target  to  fire  at  as  San  Francisco  now  presents  to  the  Canadian 
line.  Would  not  the  latter's  demand  for  a  differential  be  instantly  with- 
drawn? And,  if  so,  why?  Because  its  power  to  inflict  injury  without 
suffering  a  like  injury  at  the  hands  of  American  lines  would  not  exist. 
Enlarge  this  test.  Reverse  the  industrial  conditions  in  Canadian  terri- 
tory west  of  Lake  Superior  served  by  the  Canadian  line,  and  the  indus- 
trial conditions  in  United  States  territory  served  by  the  American  Trans- 
Continental  lines  west  of  this  river — the  Missouri  River  line.  Put  San 
Francisco  as  it  is,  in  the  place  of  Vancouver  as  it  is, — California  in  the 
place  of  British  Columbia  and  Vancouver  as  it  is, — reverse  them.  Place 
the  cities,  towns,  farms  and  other  industries  now  located  in  the  United 
States  territory  west  of  the  Missouri  River,  in  Canadian  territory  west 
of  Winnipeg.  Relegate  the  United  States  territory  referred  to  to  the 
conditions  prevailing  thirty-five  years  ago  in  all  respects  save  existing 
railroads.  Would  either  party  be  before  this  Board?  Would  not  the 
governing  council  have  adopted  such  regulations  as  to  effectually  prevent 
American  lines  from  interfering  with  the  Canadian  line's  traffic,  by  the 
use  of  an  advantage,  whether  it  be  differential  rates  or  other  device? 
If  not,  is  it  dou'btful  whether  the  Canadian  line  would  not  then  be  found 
in  the  same  attitude  of  resistance  to  the  demand  of  the  American  lines 


148 

for  a  differential,  which  we  now  occupy  with  respect  to  its  demand: 
Would  it  not  cry  out  in  protest  against  our  demands  that  they  were  not 
only  unjust  but  barbarous  because  they  rested  upon  no  other  foundation 
than  that  of  our  power  to  destroy  their  business  and  the  purpose  to 
destroy  it  unless  the  demands  were  yielded  to?  Is  it  possible,  in  this 
civilized  age  to  build  up  and  establish  a  right,  an  equitable  right,  upon 
the  doctrine  that  the  power  to  destroy  gives  the  right  to  take  over  and 
hold? 

There  may  be  no  statute  in  the  code  of  man's  making  which  will  pre- 
vent the  Canadian  line  from  presenting  to  the  American  lines  the  alter- 
native to  yield  the  advantage  it  asks,  or  suffer  the  loss  which  its  purpose 
to  take  it  will  impose  upon  them;  but  we  believe  it  to  be  against  the 
spirit  of  the  laws  of  society,  which  take  no  account  of  a  person's  power 
to  work  mischief  in  measuring  that  person's  rights,  but  are  designed  to 
protect  the  weak  against  the  strong.  That  power  may  be  taken  account 
of  and  may  continue  to  dominate  the  considerations  when  the  question 
of  expediency  is  submitted  for  determination,  but  it  can  have  no  place 
here  or  in  the  consideration  of  this  Board  of  the  question  submitted.  Will 
the  High  Court  of  Arbitration  appointed  to  determine  the  respective 
rights  of  the  British  Government  and  the  Venezuelan  Government  in 
respect  to  certain  territory,  the  ownership  of  which  is  in  dispute,  be  influ- 
enced in  reaching  a  determination  of  the  questions  submitted  by  the 
fact  that  Great  Britain  could  take  the  land  she  claims  or  destroy  the 
Venezuelan  Government,  or  inflict  greater  loss  upon  the  Venezuelan 
Government  than  the  disputed  land  is  worth? 

It  may  be  true,  and  we  believe  it  to  be  true,  as  the  Inter-state  Com- 
merce Commission  says  in  the  Canadian  Pacific  Passenger  Differential 
case,  that: 

"If  the  Canadian  Pacific  used  its  power  to  inflict  injury  as  a 
means  of  obtaining  the  allowance  of  a  differential,  that  is  precisely 
what  in  a  greater  or  less  degree  every  road  which  obtains  a  dif- 
ferential or  an  advantage  in  the  shape  of  a  differential  does." 

It  is  likewise  true  that  powerful  nations  at  times  go  to  war  with 
weaker  nations,  or  threaten  to  do  so,  in  order  to  gain  advantage,  and 
the  issue  of  that  war  is  not  doubtful;  but  when  they  refer  the  question 
as  one  of  right  to  the  arbitration  of  a  disinterested  tribunal,  as  in  the 
Anglo-Venezuelan  case,  the  relative  power  of  the  contestants,  the  mani- 
fest result  of  war,  are  put  out  of  sight;  and  if  the  claim  of  one  party  is 
found  to  have  no  other  foundation  than  its  power  to  destroy  or  injure 
the  other  party,  the  conclusions  of  the  arbitrators  are  inevitably  in  favor 
of  the  party  subject  to  said  injury. 

Take  away  from  this  case  what  we  all  know  and  what  the  American 


149 

lines  fear,  the  power  of  the  Canadian  line  to  destroy  this  commerce  with- 
out anything  like  a  similar  injury  or  equal  injury  being  inflicted  upon  it, 
I  appeal  to  every  member  of  this  Board  if  we  would  be  here,  if  you 
would  ever  hear  of  this  differential  case  or  would  have  ever  heard  of  it? 
So  in  this  case  we  submit  that  if  the  Board  finds  that,  but  for  its  power 
to  injure  the  subject  business  of  the  American  lines,  the  Canadian  line 
would  not  have  preferred  its  original  demand  for  a  differential,  much 
less  have  persisted  in  it;  that,  as  no  equitable  right  can  subsist  alone 
in  such  power,  we  are  entitled  to  the  decision  in  this  case. 

If  it  please  the  Honorable  Board,  this  question  when  reduced  to  its 
last  analysis,  stripped  of  its  cloak  of  technical  phraseology  and  exposed 
to  the  understanding  of  the  non-professional  mind,  the  naked  question 
submitted  to  your  determination  is:  Has  the  Canadian  line  such  right 
to  an  arbitrary  allotment  of  San  Francisco  traffic,  that  the  American 
lines  shall  be  required  to  adjust  rates  so  as  to  force  American  citizens 
to  use  the  facilities  of  that  foreign  line  for  domestic  transportation?  That 
is  the  naked  question.  The  question  is  not  whether  the  American  lines 
shall  make  more  money  or  have  a  more  comfortable  time  by  yielding 
the  demand  of  this  stranger  to  our  soil  and  our  laws.  The  submission 
to  your  Honorable  Board  is  one  of  title  and  right.  It  is  not  one  of 
expediency.  The  right  asserted,  either  subsists,  or  it  does  not  subsist. 
There  is  no  middle  ground.  The  Canadian  line  affirms  this  right.  As 
I  have  stated  once  before  today,  "he  who  affirms  must  prove."  We 
contend,  that  it  must  not  only  establish  its  title  and  right  to  an  undefined 
share  of  the  San  Francisco  traffic,  but,  necessarily,  that  its  title  or  right 
is  an  exclusive  title,  a  sole  right,  because  it  is  asserted  against  all  the 
American  lines.  It  must  establish  its  right  to  be  dealt  with  preferen- 
tially, to  have  us  deal  with  it  as  we  may  not  deal  with  each  other.  It  must 
provide  this  Board  with  a  reason  upon  the  record  of  which  your  Honors 
may  stand  before  the  world  in  justification  of  your  decision,  that  we, 
who  are  to  the  manor  born,  citizens  of  this  Nation,  shall  give  way  to 
an  alien,  a  stranger  within  our  gates.  What  reason,  founded  in  equality 
of  privilege  which  everywhere  is  co-existent  with  equality  of  right,  has 
been  advanced  by  our  adversary?  Whence  comes  the  asserted  title  and 
right?  What  will  be  the  answer  of  this  Honorable  Board  to  that 
question? 

If  it  please  the  Board,  I  have  in  passing  referred  to  and  submitted 
several  Exhibits:  "A",  "B",  "C",  rtD",  "E"  and  "F".  I  wish  now  to 
offer  "Exhibit  G": 

"Exhibit  G:"     Comparison  of  distances  via  Vancouver,  Seattle, 
Portland,  New  Orleans  and  Galveston,  respectively. 

Those  are  compiled  from  the  "Travelers  Official  Guide,"  my  authority 
for  the  distances  I  have  used. 


"Exhibit  H,"  I  have  already  filed.  "Exhibit  I,"  the  same;  "Ex- 
hibit J,"  the  same. 

"Exhibit  K,"  "K-2"  and  "K-3,"  are  the  lists  of  Differentials. 

"Exhibit  K:"  Freight  Differentials  in  the  United  States,  prepared 
by  Secretary  of  the  Inter-state  Commerce  Commission,  Sep- 
tember, 1898. 

"Exhibit  K-2:"  Circular  Central  Freight  Assn.,  Chicago,  show- 
ing rates  to  and  from  west  bank  of  Lake  Michigan  ports, 
November,  1897. 

"Exhibit  K-3:"  Freight  Differentials  between  Joint  Traffic  and 
Trunk  Line  territories  and  San  Francisco. 

"Exhibit  L:"  Report  and  Opinion  of  Inter-state  Commerce  Com- 
mission in  re-Passenger  Differentials  by  Canadian  Pacific 
Railway,  August,  1898. 

"Exhibit  M:"  Report  of  Discussion  Canadian  Pacific  Differen- 
tials at  meeting  Trans-Continental  Lines,  Denver,  August, 
1898. 

"Exhibit  N:"  Comparison  of  Distances  of  the  all-rail  lines  of 
Canadian  Pacific,  Great  Northern  and  Northern  Pacific. 

"Exhibit  O:"  Comparison  of  Distances  of  the  all-rail  lines  of  the 
Texas  &  Pacific  and  "Sunset  Route"  of  the  Southern  Pacific 
Co. 

"Exhibit  P:"  Senate  Report  No.  847,  5ist  Congress,  First  Ses- 
sion. 

"Exhibit  Q:"  Statistics  of  Railways  in  the  United  States  in  1896, 
published  by  the  Inter-state  Commerce  Commission. 

"Exhibit  R:"  Report  of  the  Inter-state  Commerce  Commission, 
in  the  matter  of  the  application  of  the  Atchison,  Topeka  & 
Santa  Fe  Ry.  Co.,  and  others,  for  a  suspension  of  the  fourth 
section,  decided  February  24th,  1898. 

"Exhibit  S:"  Article  in  the  New  York  Sun  of  July  16,  1898, 
entitled  "War  in  Passenger  Rates." 

"Exhibit  T:"  Report  1530,  5ist  Congress,  ist  Session,  on  relations 
with  Canada.  Testimony. taken  by  the  Select  Committee  on 
Relations  with  Canada,  United  States  Senate. 

"Exhibit  U:"  Showing,  payments  that  were  made  to  the  Cana- 
dian Pacific  Railway  Company  during  the  year  1891,  that  I 
read  from  yesterday. 

I  believe,  if  it  please  your  Honors,  that  is  all  I  have  to  present.  I 
realize  that  I  have,  in  a  large  measure  taxed  your  patience.  I  ought 
to  apologize.  All  I  can  say  is,  if  you  have  suffered  more  than  I  have,  you 
deserve  a  greater  amount  of  sympathy  and  I  extend  you  my  most  hearty 
thanks.  Do  you  care  for  this  map  as  an  exhibit? 


ARBITRATOR  WASHBURN— Yes. 

MR.  STUBBS — As  many  of  these  exhibits  that  I  have  are  original 
documents,  and  belong  in  my  records,  after  you  are  through  with  them, 
I  suppose  they  can  be  returned  to  me;  they  are  my  own  exhibits. 

ARBITRATOR  WASHBURN— Yes." 

ARBITRATOR  MIDGLEY— Mr.  Stubbs,  might  I  ask  you  a  ques- 
tion, please? 

MR.  STUBBS— Yes. 

ARBITRATOR  MIDGLEY— I  think  there  has  not  probably  been 
any  statistics  kept  by  the  Trans-Continental  Bureau  for  several  years? 

MR.  STUBBS— No  sir. 

ARBITRATOR  MIDGLEY— Would  you  be  willing  to  furnish  a 
statement  of  the  business  since  the  time  you  suspended;  all  of  the  business 
by  years,  separating  the  eastbound  and  the  westbound? 

MR.  STUBBS — I  would  not,  for  the  reason  that  it  has  nothing  to  dc 
with  the  case. 

ARBITRATOR  MIDGLEY— My  object  in  making  the  inquiry,  was, 
you  have  complained  of  the  past  injury  done  you  by  reason  of  this  com- 
petition with  the  Canadian  Pacific,  and  so,  taking  their  traffic,  which  we 
will  call  for  at  the  same  time,  we  would  ascertain  the  percentage  of  the 
total  they  have  carried. 

MR.  STUBBS— I  beg  the  Honorable  Board's  pardon.  I  do  not 
think  it  will  be  found  anywhere  in  our  statement  that  we  have  complained 
of  injury  done  by  the  Canadian  Pacific.  We  have  claimed  what  was  mani- 
fest, or  what  must  be  manifest  to  the  Honorable  Member,  himself,  that  we 
have  given  this  differential  in  the  past  to  the  Canadian  Pacific,  through 
fear,  or  constraint — fear  that  there  would  be  incalculable  injury  done  to 
us.  I  have  made  no  statement  that  the  Canadian  Pacific  has  damaged  us 
in  the  past  few  years. 

ARBITRATOR  MIDGLEY— In  looking  over  the  proceedings,  after 
I  was  appointed,  and  called  for  the  record — in  fact  took  them  home  and 
read  them,  I  recalled  a  speech  of  Mr.  Mellen's  at  one  of  the  meetings, 
in  which  he  said,  for  example,  that  five  per  cent — that  is  as  I  remember — 
would  not  be  an  unfair  amount  for  the  Canadian  Pacific  to  have  carried. 

MR.  STUBBS — That  probably  would  come  under  the  second  ques- 
tion submitted  to  the  Board,  possibly.  If  it  please  the  Board,  you  will 
notice  I  have  not  touched  the  second  question,  for  the  reason  that  the 
submission  to  this  Board  is  the  question  of  title  and  right.  I  do  not 
believe,  and  cannot  be  made  to  believe,  that  this  Board  or  any  Board 
will  decide  that  the  Canadian  Pacific,  or  any  other  line,  has  a  title  or 
right  to  a  differential  rate,  or  a  title  or  a  right  to  any  portion  of  the 
traffic  that  makes  a  differential  rate  necessary  in  order  to  obtain  it.  When 
we  get  to  the  second  question,  then  I  shall  be  very  glad  to  do  every- 
thing that  I  can  in  the  way  of  giving  information. 


152 

ARBITRATOR  MIDGLEY— At  the  close  of  Mr.  Kerr's  remarks 
for  the  Canadian  Pacific,  one  of  the  Arbitrators  asked  him  for  certain 
information  in  the  way  of  statistics,  which  he  said  he  did  not  have  now, 
but  would  procure  them.  I  simply  wanted  to  comment  on  the  differ- 
ence in  position. 

MR.  STUBBS — I  have  noticed  what  Arbitrator  Day  did  at  that  time. 
Arbitrator  Day,  I  suppose,  knows  what  he  is  about. 

ARBITRATOR  DAY— Mr.  Kerr  was  talking  about  the  volume  of 
traffic,  and  he  said,  among  other  things,  that  if  this  Board  of  Arbitrators 
did  not — this  is  the  way  I  understood  him — that  if  this  differential  was 
not  granted  the  Canadian  Pacific  that  it  would  practically  result  in  their 
exclusion  from  the  United  States.  I  asked  Mr.  Kerr  for  the  total 
volume  of  Inter-state  traffic  which  they  carried.  That  is  easily  obtainable 
from  the  Treasury  records  of  the  United  States  Government,  because  they 
preserve  them.  I  then  asked  him  to  separate  them  and  divide  his  traffic, 
and  let  us  know  what  portion  of  the  whole  was  California  traffic,  either 
to  California  or  from  California.  It  was  with  that  view,  and  to  meet  that 
point  which  Mr.  Kerr  himself  made,  that  I  asked  for  that  information. 
Mr.  Kerr  did  not  have  it  and  could  not  give  me  even  an  approximation 
in  respect  to  any  of  it.  I  do  not  ask  them  to  go  to  work  and  procure 
statistics.  If  he  wishes  to  do  so  within  a  reasonable  time,  while  the  Board 
is  together,  I  shall  be  glad  to  see  them;  but  I  asked  for  them  only  in 
reference  to  that  particular  point  which  he  himself  raised. 

ARBITRATOR  MIDGLEY— This  Board  has  not  anything  to  do  in 
the  submission  of  this  Trans-Continental  question,  with  shipments  be- 
tween Chicago  and  Boston.  It  is  simply  confined  to  Trans-Continental 
traffic,  and  the  differentials  are  not  claimed  nor  applied  on  any  other. 

ARBITRATOR  DAY— That  is  what  I  thought.  Mr.  Kerr  has  made 
the  statement  that  if  this  Board  did  not  grant  or  concede  their  conten- 
tion, and  grant  them  a  differential,  that  it  would  practically  exclude  them 
from  the  United  States. 

ARBITRATOR  MIDGLEY— It  would  not  exclude  them  from  busi- 
ness between  points  in  the  States  where  it  did  not  have — 

ARBITRATOR  DAY— You  made  your  statement  so  broad  that  I 
thought  I  would  ascertain  the  traffic  and  how  it  was  applied. 

.  ARBITRATOR  WASHBURN— Mr.  Stubbs,  I  understand  you  have 
finished? 

MR.  STUBBS— Yes  sir,  I  have  closed. 

ARBITRATOR  WASHBURN— Will  there  be  any  other  speakers  in 
behalf  of  the  American  lines? 

MR.  STUBBS— I  do  not  know  of  any. 

ARBITRATOR  WASHBURN— Then  the  Board  is  ready  to  hear 
the  Canadian  Pacific  in  its  closing  argument. 

MR.  STUBBS-  Here  is  an  exhibit  I  intended  to  put  in.     You  may 


not  want  it,  and  at  the  same  time  you  may  be  very  likely  to  need  it. 
It  is  the  Proceedings  of  the  Trans-Continental  Association.  I  have  had 
them  taken  out  from  the  body  of  the  books  and  everything  that  relates  to 
those  proceedings  and  the  Trans-Continental  Association,  that  relates 
to  freight  differentials,  is  presented  here  in  form  that  is  more  ready  for 
your  examination,  than  if  you  were  to  go  and  search  through  those  books. 
If  you  had  rather  have  them  I  will  file  it  with  you. 

ARBITRATOR  WASHBURN— I  would  like  to  have  them. 

MR.  STUBBS— I  file  this  as  "Exhibit  V." 

ARBITRATOR  WASHBURN— Mr.  Kerr,  you  may  proceed. 

MR.  KERR — Mr.  Chairman,  and  gentlemen:  As  it  is  now  after  4 
o'clock,  and  the  representative  of  the  American  lines  has  developed  sev- 
eral points,  covered  with  a  very  eloquent  display  of  pyrotechnics  and 
oratory,  I  would  ask  that  the  Board  adjourn  until  tomorrow  morning.  I 
would  like  the  opportunity  of  going  through  and  picking  the  meat  out 
of  all  this  long  discussion,  in  order  to  try  and  answer  any  points  that  have 
been  raised  that  have  not  been  already  covered  in  my  statement.  A  great 
deal  has  been  said,  and  it  will  take  from  now  until  bedtime  really  to 
get  at  it,  and  I  would  like  that  opportunity  of  doing  it  quietly  and  leisurely, 
in  order  that  I  may  be  able  to  come  before  you  in  the  morning  with  a 
proper  statement  of  our  case  in  refutation  of  their  points. 

ARBITRATOR  WASHBURN— We  will  adjourn  until  10  o'clock 
to-morrow  morning. 

At  4:15  P.  M.  an  adjournment  was  taken  until  October  I5th,  at  10 
o'clock  A.  M. 


Morning  Session,  October  15,  1898,  10  A.  M. 
The  meeting  convened  pursuant  to  adjournment. 

ARBITRATOR  WASHBURN— Sincewe  adjourned  yesterday  after- 
noon, a  telegram  has  been  received  from  Mr.  Shaughnessy  by  Mr.  Kerr, 
expressing  a  desire  to  be  present  before  the  hearing  is  closed,  and  I  infer, 
to  possibly  make  some  remarks  upon  this  subject,  and  I  would  like  to  ask 
the  representative  of  the  American  lines,  if  he  has  any  objection  to  that. 
He  cannot  be  here,  he  states,  until  Monday  morning. 

MR.  STUBBS — Mr.   Chairman,   I  do  not  know  that  we  have  any 


154 

objections.     I  think  we  are  prepared  to  stand  on  our  case  as  it  is  made, 
at  the  same  time  I  think  it  pertinent  that  this  statement  be  made: 

This  matter  was  agreed  to  on  August  23rd.  At  that  time,  as  I 
once  before  stated  to  the  Board,  we  hoped  to  be  able  to  get  it  out  of 
the  way;  to  make  the  submission,  expecting  the  question  to  be  decided 
before  October  loth.  On  that  account  the  meeting  at  Denver,  which  was 
attended  by  representatives  of  all  the  Trans-Continental  lines,  inclusive 
of  the  Canadian  line,  adjourned  to  meet  at  New  York  on  October  loth, 
for  a  consideration  of  the  general  situation,  with  the  end  in  view  of  im- 
proving it,  if  that  were  possible.  Some  Committees  were  appointed  for 
the  purpose  of  leading  up  to  the  work  that  might  come  before  that 
meeting  in  New  York.  These  facts  will  be  revealed  to  you  if  you  will 
refer  to  the  proceedings  of  the  Denver  meeting,  which  I  understand 
have  been  filed.  We  all  went  about  preparing  our  case  immediately 
upon  the  adjournment  of  that  meeting — I  am  speaking  now  for  the 
American  lines,  and  in  that  respect  speaking  for  myself  more  perhaps 
than  for  any  other  member  of  the  Committee — laying  aside  much  of 
our  current  work  in  order  to  prepare  for  this  hearing.  The  Canadian  line 
had  the  same  opportunity,  and  I  presume  that  the  same  spirit  inspired 
them  that  inspired  us  in  the  matter.  Later  on,  in  correspondence  with 
Mr.  Morton,  who  was  the  mouth-piece  of  the  Chicago  resident  members 
of  the  Committee,  it  developed  that  some  understanding  was  desirable 
as  to  how  the  submission  should  be  made.  Just  how  that  came  up, 
I  do  not  know,  but  I  was  advised  that  the  Canadian  line  asked  our  people 
here  whether  this  submission  was  to  be  made  by  traffic  men  or  by  coun- 
sel. We  expressed  a  willingness  to  leave  the  presentation  to  the  traffic 
men,  and  I  have  -been  informed  by  Mr.  Morton  that  he  had  the  under- 
standing with  Mr.  Shaughnessy,  that  this  presentation  was  to  be  made 
by  the  traffic  men.  That  is,  so  far,  supported  by  telegraphic  correspond- 
ence passing  between  Mr.  Kerr  and  myself.  I  received  a  message  from 
Mr.  Kerr  asking  me  if  our  case  was  to  be  presented  by  counsel  or  by 
traffic  men,  and,  if  so,  by  whom.  I  replied  that  the  Committee  had 
not  yet  met,  but  that  I  understood  that  the  case  was  to  be  presented 
on  our  side  by  traffic  men;  as  to  who  would  present  it,  I  did  not  know; 
we  had  not  reached  any  conclusion  as  to  that.  I  received  an  answer 
from  Mr.  Kerr  to  this  effect,  that  that  was  all  right,  except  that  if  we 
afterwards  decided  upon  presentation  by  counsel,  he  wished  to  notify  me 
that  the  Canadian  line  would  ask  fur  a  postponement  of  the  hearing,  in 
order  to  coach  their  counsel.  I  responded  to  that  by  saying  that  I  should 
see  that  he  was  properly  notified,  and  immediately  alter  it  was  concluded 
that  I  should  make  the  presentation  for  the  American  lines,  I  wired  Mr. 
Morton  to  consult  with  Mr.  Truesdale  and  give  notice  to  Mr.  Kerr  to  the 
effect  that  it  had  been  finally  decided,  so  far  as  our  part  of  the  case  was 


155 

concerned,  that  we  should  submit  it  by  traffic  men.  Upon  my  arrival 
here,  I  asked  Mr.  Morton  if  the  notification  had  been  sent,  upon  which 
he  informed  me,  as  I  have  said,  that  it  had,  upon  receipt  of  my  despatch, 
and  that  there  was  an  agreement  that  the  arguments  were  to  be  made 
by  traffic  men  on  both  sides,  and  I  believe  he  stated  that  he  notified  the 
Canadian  people  that  I  was  to  represent  the  American  lines. 

Now,  it  has  been  intimated  to  me  that  the  Canadian  people  are  under 
the  impression  that  we  have  had  the  advice  and  aid  of  counsel.  That 
is  not  true;  not  in  any  sense,  nor  in  any  degree.  The  presentation  of 
the  case  that  has  been  made  by  the  American  lines,  is  my  work,  wholly 
unassisted  by  any  lawyer  or  any  counsel  by  way  of  advice,  reference  or 
suggestion.  The  only  assistance  I  have  received  has  been  on  the  part 
of  the  traffic  men  who  are  members  of  the  Committee.  I  have  supposed, 
and  I  think  that  the  agreement  so  far  reached  necessarily  implies,  taking 
all  the  circumstances  into  consideration,  that  this  submission  was  to  be 
made  by  the  traffic  men;  that  it  was  to  be  made  at  this  hearing  without 
any  unnecessary  delay,  to  the  end  that  we  might  go  about  our  business, 
which  the  Board  knows  is  very  pressing;  and  I  have  purposely  avoided 
anything  that  would  in  any  way  delay  the  case.  Now,  the  Canadian 
Pacific  have  had  the  same  opportunities  that  we  have  had.  They  have 
been  represented  here  by  their  traffic  men;  the  men  who  have  been 
familiar  with  this  case  from  the  very  beginning.  There  is  only  one 
man  that  I  know  of,  who  has  ever  represented  the  Canadian  Pacific  in  any 
of  our  general  meetings,  or  of  our  exclusively  freight  meetings  on  this 
subject,  that  is  not  present  here,  and  that  is  Mr.  George  Olds,  and  he  has 
been  out  of  it  for  a  long  time. 

I  think  at  every  meeting,  except  perhaps  the  first  one,  Mr.  Kerr 
has  represented  the  Canadian  line.  He  is  the  man  who  takes  the  burden 
of  this  business,  with  Mr.  Bosworth; — of  handling  this  question  with 
the  American  lines.  He  has  taken  charge  of  it  from  the  very  beginning. 
The  Canadian  line  has  no  other  man  that  is  so  well  posted,  or  that,  in 
my  judgment,  is  as  able  to  represent  them  before  this  Board,  as  Mr.  Robt. 
Kerr.  Coming  in  now,  after  their  opening,  and  our  submission  of  our 
case,  and  asking  for  time  to  bring  in  the  Vice-President — the  active  man- 
ager of  their  road — the  man  who  controls  the  entire  policy  of  the  road, 
subject  only  to  the  President,  it  seems  to  me  is  a  departure  from  the 
agreement.  I  should  say  that  it  was  only  reasonable  that,  if  you  accord 
this  privilege — and  I  am  not  going  to  object  to  it — that  I  should  have 
the  right  to  bring  our  Vice-President  here  to  answer  Mr.  Shaughnessy 
— General  Hubbard;  but  in  order  to  do  that  I  should  have  to  ask  for 
further  delay,  for  I  do  not  know  that  he  even  knows  that  we  are  arbi- 
trating this  case.  I  reported  to  our  President  the  result  of  the  August 
meeting  at  Denver,  and  wrote  him,  and  just  this  morning  received 
his  reply  in  acknowledgment  of  the  receipt  of  my  letter  advising  him  that 


156 

I  had  been  selected  to  present  the  case  of  the  American  lines.  I  had 
hoped  that  we  would  present  this  speedily  and  that  I  should  be  able  to 
get  home;  that  is  to  leave  for  San  Francisco  tonight.  That,  I  now  see 
is  not  possible. 

Now,  with  that  statement  of  the  case,  I  propose  to  leave  the  matter 
entirely  in  the  hands  of  the  Board,  and  shall  be  satisfied.  I  do  not  intend 
to  make  any  reservations,  but  leave  our  case  in  that  respect  entirely  in  the 
hands  of  the  Board. 

ARBITRATOR  DAY— Mr.  Stubbs,  I  understand  you  say  that  you 
do  not  object. 

MR.  STUBBS — Yes  sir;  I  say  I  am  not  going  to  object. 

ARBITRATOR  WASHBURN— Mr.  Kerr  do  you  wish  to  make 
any  further  statement  of  the  matter? 

MR.  KERR — I  do  not  think  the  subject  calls  for  any  statement  from 
me.  Mr.  Shaughnessy  is  our  chief  traffic  officer;  in  the  same  way,  of 
course,  he  is  also  our  chief  operating  officer.  He  takes  a  very  deep 
interest  in  all  matters  of  traffic.  All  matters  of  importance  that  come 
up  in  connection  with  the  traffic  department  must  be  passed  in  review 
before  our  Vice-President,  so  that  in  asking  that  he  should  appear  here 
before  you,  the  Canadian  Pacific  Company  are  simply  presenting  to  you 
their  chief  traffic  officer.  Heretofore  you  have  been  listening  to  one  of 
the  subordinate  officers.  Therefore,  I  take  it  as  not  wrong  or  amiss  that 
the  Canadian  Company  should  be  heard  through  their  Vice-President. 

MR.  STUBBS — Why  has  he  not  been  here  from  the  beginning?  It 
has  developed  by  this  statement  you  were  not  going  to  call  him  in ;  you 
had  no  intention  of  bringing  him  in,  in  the  first  place. 

ARBITRATOR  WASHBURN— When  I  was  first  called  into  this 
case,  we  took  up  the  matter  of  the  manner  in  which  the  railroad  com- 
panies should  present  their  case  to  the  Board,  and  I  think  a  telegram 
was  sent — certainly  it  was  understood  that  one  would  be  sent — by  Mr. 
Countiss  to  both  parties  that  they  would  be  allowed  to  present  their 
case  in  any  way  in  which  they  chose,  either  by  traffic  officers,  by  other 
of  their  own  officers,  or  by  counsel,  the  desire  of  the  Board  being  to  get 
at  the  facts  in  the  case.  I  was  told  the  hearing  would  probably  require 
two  days.  This  is  the  fourth  day  and  to  remain  here  is  to  me  a  matter 
of  considerable  inconvenience.  I  have  important  matters  for  the  road 
with  which  I  am  connected  that  require  my  attention,  but  it  is  the  desire 
of  the  members  of  the  Board  to  get  all  the  light  upon  this  subject  they 
can  in  order  to  decide  the  case  intelligently,  and  as  the  representative  of 
the  American  lines  has  offered  no  objection,  we  will  consent  to  the  ap- 
pearance of  Mr.  Shaughnessy  as  desired,  and  when  the  hearing  is  ad- 
journed today,  it  will  be  until  Monday  morning  at  n  o'clock,  at  which 
time  Mr.  Shaughnessy  says  he  can  be  present.  Now,  Mr.  Kerr,  are  you 
ready  to  proceed? 


157 

MR.  STUBBS — Now,  Mr.  Chairman,  yesterday  I  filed  as  an  exhibit 
with  the  Board  a  copy  of  a  Decision  of  the  Inter-state  Commerce  Com- 
mission in  the  Passenger  Differential  case.  I  had  it  in  my  mind  at  the 
time,  but  it  escaped,  to  file  the  Record  of  the  hearing  in  that  case.  I  wish 
now  to  file  it  as  a  part  of  the  submission  yesterday.  (Filed  as  "Exhibit  Y.") 

I  also  omitted  to  file  a  document  which  I  had  with  me,  but  somehow 
it  got  out  of  the  list  of  exhibits,  in  support  of  the  averment,  on  our  part, 
that  the  opening  of,  and  operation  of  the  Canadian  line  was  inimical  to  the 
commercial  interest  of  the  City  of  San  Francisco.  In  support  of  that 
statement  I  beg  leave  to  file  as  an  exhibit  a  "Compilation  of  the  Imports 
and  Exports,  Port  of  San  Francisco."  (Filed  as  "Exhibit  W.")  It  is 
signed  by  Edward  A.  Stevenson,  who  is  our  Custom  House  Attorney 
in  San  Francisco,  but  it  is  taken  from  "Commerce  and  Navigation  of  the 
United  States,"  an  official  document  issued  by  the  United  States  Treasury 
Department.  I  have  not  that  document  with  me  but  it  is  a  public  docu- 
ment and  if  it  is  desirable  the  figures  can  easily  be  proven.  Just  for 
a  moment,  calling  the  attention  of  the  Board  to  this  showing  "Com- 
merce between  San  Francisco  and  British  Columbia  for  the  years  1880, 
1886,  1888,  1890  and  1897 — the  years  being  the  fiscal  year  ending  June 
30 — in  1880  the  exports  to  British  Columbia  by  San  Francisco  were 
$866,000;  in  1897,  they  were  $550,000."  Well,  it  will  be  found  by  ex- 
amination of  the  paper  that  the  total  exports  of  San  Francisco  as  between 
1870  and  1897  increased  three  times. 

ARBITRATOR  WASHBURN— Those  are  practically  the  figures 
you  gave  us  yesterday  as  I  remember. 

MR.  STUBBS— No,  I  did  not  give  these  figures  at  all. 

ARBITRATOR  WASHBURN— I  do  not  know  that  you  gave  these 
figures,  but  I  got  that  result  from  my  own  calculations  of  the  figures  you 
did  give. 

MR.  STUBBS — I  also  wish  to  file,  just  to  bring  the  matter  before 
the  Board  so  that  in  its  consideration  of  the  subject  it  may  have  had 
its  attention  called  to  this  point  and  give  it  whatever  weight  the  Board 
thinks  it  is  entitled  to,  a  copy  of  the  Evening  Post  of  October  13,  1898. 
(1'iled  as  "Exhibit  X.") 

ARBITRATOR  WASHBURN— The  Chicago  Post? 

MR.  STUBBS — Yes  sir,  yesterday's  Post,  calling  attention  to  the 
special  cable  to  the  Evening  Post  under  the  general  caption  of  "Republi- 
can Money  Markets,"  in  which  is  stated  that  at  the  meeting  of  the 
directors  of  the  Grand  Trunk  Railway  of  Canada  today  the  Chairman 
stated  that  negotiation  with  the  Canadian  Pacific  for  the  restoration  of 
local  rates  had  proved  abortive,  the  reason  being  that  the  Canadian 
Pacific  wished  to  dis-associate  the  Grand  Trunk  from  connection  with 
American  lines  in  the  matter  of  through  business.  Those  were  conditions 
to  which  the  Grand  Trunk  could  not  consent.  That  is  submitted  in  reply 


158 

to  the  assertion  upon  the  part  of  the  other  side  that  the  participation  in 
purely  domestic  Canadian  business  by  the  American  lines  was  welcome 
to  the  Canadian  line.  It  is  a  matter  of  public  knowledge  that  this  brief 
statement  found  in  the  despatch  which  I  have  referred  to,  refers  to  the 
fact  that  because  the  Grand  Trunk  line  would  not  withdraw  from  its  con- 
nection with  American  lines  for  purely  Canadian  business  and  work 
wholly  and  solely  with  the  Canadian  Pacific  line,  that  the  Canadian  Pacific 
cut  the  local  rates,  instituted  a  war  of  local  rates  in  Canada  against  the 
Grand  Trunk  to  compel  it  to  do  that  thing. 


ARBITRATOR  WASHBURN— Mr.  Kerr,  are  you  ready  to  proceed 
now? 

MR.  KERR — Mr.  Chairman  and  Gentlemen  of  the  Board:  Before 
proceeding  to  the  main  case,  I  ask  permission  to  make  a  short  reference 
to  the  two  exhibits  that  Mr.  Stubbs  has  just  filed  with  you.  In  the 
first  place,  in  his  remarks  in  connection  with  the  filing  of  that  trade 
report  showing  the  exports  from  San  Francisco  to  British  Columbia 
Coast  points,  and  showing  that  in  a  given  number  of  years  a  falling  off 
has  taken  place,  that  those  exports  have  decreased,  their  values  have 
decreased.  In  order  that  you  should  arrive  at  a  fair  conclusion  as  to  just 
what  that  means,  if  the  matter  to  your  mind  has  any  bearing  on  the  sub- 
ject in  hand,  you  should  first  obtain  the  returns  from  American  North 
Pacific  Coast  points,  the  exports  from  those  points,  from  Portland, 
Tacoma,  Seattle  and  points  on  Puget  Sound,  to  British  Columbia  points, 
and  see  if  the  markets  of  Canada  have  been  shut  out  from  the  reach  of 
the  American  seller.  The  chief  exports  from  California  to  British  Colum- 
bia in  the  past  have  been  fruit,  dairy  products  and  cereals.  British 
Columbia  has  opened  out  of  late  years  by  reason  of  the  construction  of 
the  Canadian  Pacific  road.  Its  valleys  are  rapidly  filling  with  an  agricul- 
tural population,  and  they  are  very  fertile  and  rich  valleys  that  can  pro- 
duce almost  anything  required  for  the  use  of  man,  for  his  necessities 
Now,  the  producing  power  of  those  valleys  is  increasing  every  year,  they 
are  producing  more  and  more,  and  they  have  more  to  sell.  What  more 
natural  than  that  they  should  supply  their  products  to  the  towns  and  cities 
of  the  coast  in  British  Columbia?  And  what  more  natural  than  that  the 
exports,  the  sales  of  products  from  San  Francisco,  should  decrease? 
Surely,  there  is  nothing  in  that  very  natural  course  to  influence  you,  or 
to  bear  on  this  subject  in  hand,  nor  to  create  in  your  minds  any  prejudice 
whatever. 

Concerning  the  filing  of  this  newspaper  as  a  matter  of  record — official 
record  before  you — there  is  no  one  who  has  any  greater  regard  and 
respect  for  the  newspapers  than  I  have.  They  are  a  mighty  power  for 


good,  and  they  are  a  mighty  power  for  evil;  but  we  all  know  that  they 
are  not  always  accurate  in  their  statements  of  facts.  The  very  nature  of 
things,  the  rush  and  turmoil  of  this  busy  life,  this  busy  period,  this  end 
of  the  I9th  century,  precludes  the  possibility  of  men,  who  are  devoted 
to  the  gathering  of  news,  the  hurry  and  scurry,  to  do  more  than  gather 
the  points  here  and  there.  They  get  the  skeleton,  and  they  build  on 
the  body;  and,  in  that  building,  they  are  very,  very  frequently,  out  of 
line,  and  do  not  get  their  proportions  right.  Now,  even  in  my  wildest 
moments,  I  do  not  think  1  would  ever  dream  of  riling  a  newspaper  as 
evidence  before  a  Board  of  intelligent,  experienced  men,  such  as  I  am 
standing  before,  to  take  it — such  a  report,  as  being  correct;  and  if  it  is 
correct,  what  does  it  mean?  It  has  nothing  to  do  with  this  subject  that 
is  before  you.  The  whole  question  under  discussion  is  the  passenger  mat- 
ter. It  is  a  question  of  restoration  of  passenger  rates,  with  the  hope  of 
increasing  passenger  revenues.  There  have  been  various  points  of  dis- 
pute, as  you  all  know,  as  between  the  Canadian  Pacific  and  the  Grand 
Trunk.  Does  anybody  mean  to  say  that  there  are  not  also  many  points 
of  dispute  as  between  the  American  lines,  one  with  the  other?  Has  the 
Southern  Pacific  Company  no  disputes  with  their  neighbors  of  any  kind? 
Now,  why  should  a  newspaper  report  bearing  on  passenger  difficulties, 
that  may  or  may  not  exist,  as  between  the  Grand  Trunk  and  the  Canadian 
Pacific,  the  Grand  Trunk,  and  any  other  Company,  Canadian  or  Ameri- 
can, the  Canadian  Pacific  and  any  other  company,  Canadian  or  Ameri- 
can, on  purely  passenger  matters,  have  anything  whatever  to  do  with 
this  case?  I  do  not  see  what  light  or  information  such  a  newspaper  article 
as  that  can  give  to  you  gentlemen  to  aid  you  in  deciding  on  a  purely 
freight  traffic  question. 

The  representative  of  the  American  lines  has  presented  to  you  a 
most  voluminous  statement  of  his  case.  It  is  clothed  in  many  words.  No 
fox  ever  eluded  his  pursuers,  ever  doubled  on  his  tracks  with  greater 
skill  than  the  representative  of  the  American  lines  in  iterating,  reiterating, 
presenting  and  re-presenting,  in  every  form  and  phase,  pretty  near,  that 
the  English  language  is  capable  of  being  turned  into;  the  same  thing 
over  and  over  again,  with  the  idea  of  thumping  and  pounding  and  pound- 
ing the  points  so  that  they  will  be  thoroughly  clinched  and  stay.  In 
doing  this,  he  has  shown  a  great  deal  of  cleverness.  We  know  that  he  is 
clever,  but,  in  doing  it,  he  also  has  obscured  and  be-clouded  it  to  such 
an  extent  that  it  becomes  at  least  to  me,  almost  an  impossibility  to  follow 
him  through  in  anything  like  a  connected  manner.  Therefore,  I  hope 
I  will  not  exhaust  your  patience  in  endeavoring  to  follow  him.  I  may 
have  to  iterate  and  reiterate,  on  the  same  points,  double  and  come  back. 

The  representative  of  the  American  lines  in  the  opening  of  his  case 
on  Thursday  afternoon,  makes  use  of  this  statement:  "This  contention 
is  in  respect  to  freight  rates,  and  freight  rates  only,"  meaning  that  the 


i6o 

subject  before  this  Board  is  one  pertaining  exclusively  to  freight  rates; 
but  we  find,  during  the  course  of  his  argument,  he  has  again  and  again 
quoted  and  made  reference  to  a  decision — not  a  decision, — they  do  not 
claim  it  to  be  a  decision — of  the  Inter-state  Commerce  Commission,  it 
is  an  opinion  that  they  gave  in  connection  with  the  Passenger  Differen- 
tial case.  He  has  not  only  done  this,  but  he  has  filed  with  your  Board, 
the  opinion  of  the  Commission  in  connection  with  the  case.  Now,  it  is 
not  at  all  clear  to  me  what  bearing  a  passenger  question  which  stands 
alone,  by  itself,  can  have  on  this  freight  question,  that  stands  alone  by 
itself.  We  all  know  that  precedents,  customs,  rules  and  regulations,  per- 
taining to  the  handling  of  passenger  business  are  very  different  from 
customs,  rules  and  regulations  pertaining  to  the  handling:  of  freight 
business.  Sometimes  general  principles  can  be  applied  to  both,  but  what 
may  be  done  or  said  in  a  passenger  matter,  cannot  possiblv  have  any 
connection  with  what  you  do  and  how  you  act  in  a  purely  freight  matter, 
therefore,  I  have  not  the  least  fear  that  all  these  passenger  records,  that 
our  opponent  has  filed  with  you,  will  have  anv  influence  on  vour  minds 
whatever  in  dealing  with  this  subject. 

Mr.  Stubbs  makes  argument  that  the  so-called  Pier  rates  in  effect 
by  the  "Sunset,"  "Mallory"  and  "Atchison"  lines,  and  "Cromwell"  and 
Texas  &  Pacific  lines,  cannot  be  regarded  as  differential  rates  for  the 
reason  that  the  all-rail  lines  may  make  the  same  rates  if  they  wish.  The 
published  rates  as  shown  in  Trans-Continental  Freight  Bureau  Tariffs 
are  made  up  by  conference  and  agreement  in  fact  but  not  in  theory.  That 
may  seem  paradoxical.  It  is  so.  They  are  supposed  to  be — that  is  these 
tariffs — these  agreed  published  Freight  Bureau  tariffs  are  supposed  to  be 
the  individual  rates  of  each  of  the  lines,  as  according  to  their  present 
interpretation  of  the  law,  the  roads  cannot  legally  combine  for  the  pur- 
pose of  making  an  agreement;  therefore,  each  road  is  at  liberty  to  change 
its  rates  at  any  time  without  regard  to  the  others;  doing  it  in  a  lawful 
way,  of  course,  or  else  taking  their  chances  on  the  law.  Now,  if  the  all- 
rail  lines  decided  to  adopt  and  put  into  effect,  from  New  York,  the 
Chicago  rates,  being  lower  than  published  rates  from  New  York,  and  the 
lower  rates  as  I  have  already  explained  from  Chicago  are  the  rates  that 
are  put  in  effect  from  the  New  York  piers  in  connection  with  these 
Southern  Ocean  lines — ocean-and-rail  lines — they  are  at  liberty  to  do 
so  providing  they  conform  to  the  requirements  of  the  law.  Now,  here  we 
have  a  statement  of  differential  rates,  working  and  operating  on  the  lines 
managed  by  the  great  champion  of  equality  in  rates,  for  Mr.  Stubbs  is 
the  great  champion  on  that  subject.  He  is  the  warrior  that  is  always  put 
into  the  arena  when  a  battle  is  to  be  fought,  on  that  or  any  other  subject, 
and  as  all  of  you  know  he  is  a  very  vigorous  warrior.  Now,  is  it  con- 
sistent to  come  before  this  Board,  having  the  enjoyment  of  lower  rates 
than  the  all-rail  lines  out  of  New  York  and  the  surrounding  immediate 


coast  territory?  I  think  he  has  explained  to  you  that  the  all-rail  lines, 
owing  to  their  greater  interests  up  in  the  middle  and  middle  West  States, 
cannot  always  afford  to  reduce  their  rates,  openly,  to  meet  these  differ- 
ential rates  that  the  "Sunset"  and  the  other  ocean-and-rail  lines  wrested 
— took  from — the  all-rail  lines  against  their  will.  I  say  that  deliberately 
and  knowingly,  for  I  have  been  the  witness  of  discussions  and  disputes 
on  that  subject  as  between  the  representatives  of  the  ocean-and-rail  lines 
and  the  all-rail  lines  in  meetings.  These  differentials  were  not  given 
voluntarily  to  the  "Sunset"  line,  and  "Atchison,"  and  to  the  Texas  & 
Pacific  line;  they  were  taken  by  force,  and  now  are  growing  to  be  a 
custom  to  them,  according  to  Mr.  Stubbs'  interpretation  of  the  word.  He 
is  great  on  telling  us  what  words  mean.  It  is  not  quite  conforming  to 
the  rule  as  being  beyond  the  time  whence  the  memory  of  man  runneth 
not.  We  remember  when  it  began  and  we  know  it  exists.  And  now 
they  sit  here  with  these  differential  rates,  and  they  say  it  is  right  they 
should  have  them.  I  think  Mr.  Stubbs  also  gave  us  a  lesson  on  what 
the  word  "right"  means.  On  the  records  of  the  Trans-Continental 
Freight  Bureau,  it  would  appear  as  if  the  other  lines  now  had  consented 
to  these  differences  of  rates  as  made  from  the  New  York  pier  on  the  one 
hand,  and  by  the  all-rail  lines  from  New  York  proper  on  the  other,  and 
by  the  aid  of  these  differential  rates,  these  ocean-and-rail  lines  are  enabled 
to  reach  up  into  territory  they  should  not  invade.  Still,  the  Canadian 
Pacific  Company,  in  one  place  of  Mr.  Stubbs'  statement  is  compared  to 
Barons  of  old,  who  held  up  anybody  that  came  their  way,  if  he  had  any- 
thing on  worth  holding  him  up  for. 

It  is  stated  by  the  representative  of  the  American  lines  that  the 
Canadian  Pacific  was  not  projected  or  built  for  the  purpose  of  developing, 
fostering  or  sharing  in  the  carrying  trade  between  San  Francisco  and  the 
eastern  parts  of  the  United  States.  Doubtless  that  is  true  as  an  initial 
idea.  Will  the  representative  of  the  American  lines  tell  us  or  you  that 
whenever  a  road  is  projected  and  built,  that  the  full  field  it  may  ulti- 
mately be  able  to  cover,  draw  traffic  and  revenue  from,  is  always  known 
and  taken  into  account?  Is  there  not  in  that,  as  in  many  other  business 
propositions,  an  unknown  quantity?  Do  not  railways,  small  links  at 
first,  grow  and  develop  and  by  process  of  evolution  finally  become 
great  and  long  systems  of  roads  that  cover  huge  territories  of  country, 
by  building,  by  absorption,  by  purchase,  and  the  various  other  methods 
we  recognize  of  building  up  great  systems?  A  little  road  may  be  started 
down  here — and  has  been  started — in  Illinois  or  any  other  State  in  the 
Union,  that  may  not  'be  more  than  fifty  or  one  hundred  miles  long 
when  first  projected,  but  after  the  lapse  of  years  what  do  we  find?  A 
link  in  a  great  system  of  railroads  which  may  reach  clean  across  this 
Continent.  Now,  what  point  is  there  in  it,  in  stating  that  it  was  not  con- 
templated by  the  builders  and  projectors  of  the  Canadian  Pacific  road  at 
11 


162 

the  start,  at  the  beginning,  that  we  should  reach  out  for  San  Francisto 
traffic? 

I  feel  as  if  it  is  wrong  for  me  to  take  up  your  time  in  explaining  a 
point  that  is  as  well  known,  and  better  known  to  you  than  it  is  to  me, 
that  railroad  companies  seek  for  traffic  and  revenue  from  and  between 
all  points  that  they  deem  may  be  to  their  advantage  to  do  so.  I  am 
not  seized  of  the  facts,  but  I  very  much  doubt  that  when  this  "Sunset" 
line  was  built,  as  between  San  Francisco  and  New  Orleans,  that  the 
original  projectors  had  any  idea  that  it  would  reach  away  up  to  New 
York  and  through  the  whole  northern  tier  of  States  in  the  Union, — • 
Northern  and  Eastern.  These  things  all  come  by  a  process  of  evolution. 
The  world  was  not  made  in  a  day;  we  are  told  it  took  six. 

In  this  connection,  he  very  mistakenly  calls  up  the  "Soo  Line"  as  one 
of  the  examples.  Now,  the  "Soo  Line,"  so  far  as  its  western  extension 
to  the  junction  of  the  Canadian  Pacific  line  at  Portal,  No.  Dak.,  was  built 
expressly  for  the  purpose  of  seeking  for  the  trade  and  traffic  of  the  Pacific 
Coast,  Middle-West,  Middle  and  Eastern  States.  The  Pacific  Coast 
Steamship  Company  was  not  built  and  operated  expressly  for  the  purpose 
of  carrying  Trans-Continental  freight  in  connection  with  the  Canadian 
Pacific  road.  They  are  an  old  company,  antedating  the  Canadian  Pacific 
by  many  years,  as  I  believe.  When  that  line  was  put  in  operation  they 
had  not  the  faintest  idea  that  they  were  going  to  participate  in  Trans- 
Continental  San  Francisco  traffic;  but  on  the  completion  of  the  Canadian 
Pacific  line  to  the  Pacific  Coast  very  naturally  they  sought  an  alliance 
whereby  they  could  increase  the  field  from  which  they  would  draw  rev- 
enue and  traffic.  It  was  of  mutual  interest  that  such  an  alliance  should 
be  made.  It  was  made  and  today  the  line  is  in  operation,  and  has  been 
for  a  good  num'ber  of  years.  It  is  not  necessary  for  projectors  to  have  in 
mind  all  the  possibilities  that  may  come  from  the  inception  of  construc- 
tion of  a  line  at  the  beginning. 

In  connection  with  the  question  as  to  the  special  arrangements  we 
had  with  the  Association  lines  in  1891,  turning  on  the  point  of  my  state- 
ment that  we  carried  so  little  business — practically  nothing — the  ques- 
tion was  asked  if  we  still  maintained  our  agencies,  to  which  I  replied, 
"Yes,  we  still  maintained  our  agencies  in  their  entirety."  Mr.  Stubbs 
makes  the  statement  that  the  San  Francisco  office  of  the  Canadian  line 
was  simply  a  ticket  office.  I  do  not  believe  Mr.  Stubbs  made  that  state- 
ment deliberately  in  order  to  deceive  the  Board.  He  was  simply  mis- 
taken. We  do  now,  and  have  always,  maintained  a  freight  and  passenger 
office  in  San  Francisco,  and  the  title  of  our  representative  there  is  that 
of  "District  Freight  and  Passenger  Agent."  The  agency  was  inaugurated, 
I  think  late  in  '86  or  early  in  '87.  The  same  representative  is  there  today 
as  was  appointed  then ;  he  is  there  for  the  purpose  of  taking  care  of  both 


our  freight  and  passenger  interests.  No  agencies  were  closed  during  the 
year  of  1891. 

In  that  connection  the  representative  of  the  American  lines  cites  as 
an  example  an  imaginary  case  in  connection  with  the  Union  Pacific  and 
Central  Pacific,  and  says  that  if  they  had  pursued  the  same  policy,  or 
did  pursue  the  same  policy  in  connection  with  the  canvassing  and  work- 
ing for  freight  to  and  from  competitive  points,  that  their  business  would 
leave  them,  50  per  cent  or  more,  inside  of  a  year.  That  is  my  under- 
standing of  his  statement  and  what  he  meant.  Now,  no  one  can  dispute 
that  statement  as  it  stands  alone  and  by  itself,  but  it  was  made  with 
the  purpose  of  carrying  you  away  from  the  point.  The  Union  Pacific  and 
Central  Pacific  under  like  circumstances,  conditioned  as  we  were,  under 
the  same  agreement  with  the  other  lines  as  we  were,  would,  I  take  it, 
have  done  exactly  what  we  did,  and  carry  out  their  agreement  with  the 
other  fellow  honestly  and  truly,  and  their  business  would  have  left  them 
— their  tonnage;  and,  as  in  the  case  of  the  Canadian  Pacific,  it  would  have 
taken  them  a  long  time  after  that  agreement  was  through  with,  to 
recover  and  get  back  to  the  status  of  tonnage  that  they  enjoyed  before 
they  entered  upon  that  agreement. 

The  representative  of  the  American  lines  has  laid  particular  stress  on 
the  fact  that  the  different  lines,  members  of  the  Association,  should 
contribute  to  the  Canadian  Pacific  subsidy,  paid  out  certain  sums,  which, 
from  the  figures,  you  will  notice,  shows  that  they  amounted  only  to 
about  2^  per  cent  of  their  gross  earnings,  many  of  the  lines  being  only 
300  or  400  miles  long,  away  off  in  the  center  of  the  country  there,  little 
bits  of  links  in  a  long  chain  that  traverses  this  great  country  from  the 
Atlantic  to  the  Pacific.  This,  our  opponent  considers  a  very  heavy  tax 
and  unprofitable  investment.  He  does  not  tell  you  that  the  Canadian 
Pacific  Company,  while  a  member  of  the  Association,  in  paying  its 
share  of  the  Pacific  Mail  space  rental  (so-called)  subsidy, — in  fact,  a  dif- 
ferential under  another  name, — does  not  say  that  we  were  suffering  any 
hardship  in  paying  for  something  for  which  we  gained  very  little  direct 
benefit.  Strange,  how  sometimes  a  fellow  on  the  other  side  always  for- 
gets the  good  points  against  him,  and  in  pleading  for  your  sympathy 
in  connection  with  the  great  sufferings  of  these  small  lines,  away  out 
in  the  middle  of  this  great  country,  the  middle  links,  in  contributing  to 
the  subsidy  of  the  Canadian  Pacific  road,  he  does  not  say  anything  about 
how  they  are  suffering  under  present,  conditions.  Their  sufferings,  under 
those  conditions  back  in  1891,  were  not  a  drop  in  the  bucket,  as  com- 
pared to  the  suffering  they  are  now  undergoing  by  reason  of  disturbance 
in  rates  and  reductions  in  revenues  to  and  from  points  with  which  the 
Canadian  Pacific  Company  has  nothing  on  earth  to  do.  It  cannot  reach, 
cannot  get  near,  and  still  they  will  tell  you,  and  do  tell  you,  that  the 
Canadian  Pacific  differential  is  the  great — our  greatest  disturbing  element 


"164 

in  the  rate  situation  of  the  whole  Trans-Continental  business.  They 
say  this  to  you  gentlemen,  who  know  as  much  about  the  situation  as  they 
do  and  it  sounds  to  me — I  was  going  to  say,  ridiculous,  but  I  will  only 
say,  funny,  why  they  should  do  it. 

ARBITRATOR  DAY— You  spoke  of  the  Panama  subsidy.  What 
was  the  amount  of  that? 

MR.  KERR — My  recollection  of  the  Panama  subsidy  is  that  it  was 
$65,000  a  month,  and  before  it  terminated  it  was  $75,000  a  month, 
amounting  in  the  year,  I  guess  to  something  over  $800,000,  perhaps 
$900,000;  the  records  of  the  Association  of  course  will  tell  you  if  you  care 
to  investigate  them. 

ARBITRATOR  DAY— Did  that  continue  more  than  one  year,  or  is 
it  the  year  you  particularly  mention? 

MR.  KERR — Oh  yes,  the  Panama  space  rental  arrangement  subsidy 
expired  in  1892;  when  the  Association  dissolved,  I  think  they  went  too. 

ARBITRATOR  DAY — You  were  speaking  about  your  contribution 
to  that.  What  was  the  amount  of  it? 

MR.  KERR — Our  contribution  to  that  in  1891  was  nearly  $12,000 — 
$11,700  odd — 2^  per  cent  on  the  amount  of  earnings  that  year.  The 
other  fellows,  these  little  links  out  here,  paid  us  2.\  per  cent.  We  also 
paid  2^  per  cent. 

ARBITRATOR  WASHBURN— What  roads  contributed  to  that, 
Mr.  Kerr? 

MR.  KERR— All  the  roads  in  the  Association. 

ARBITRATOR  WASHBURN— All  the  roads  of  the  Trans-Con- 
tinental Association? 

MR.  KERR— Yes  sir. 

ARBITRATOR  WASHBURN— None  of  the  roads  east  of  the  Mis- 
souri River  line  contributed,  only  the  roads  west  of  that? 

MR.  KERR — Only  the  Trans-Continental  roads;  yes  sir. 

ARBITRATOR  MIDGLEY— Those  east  of  the  river  never  con- 
tributed. 

MR.  KERR — At  our  first  entrance  into  the  Association  in  1887,  for 
a  certain  period,  we,  along  with  some  others,  did  not  contribute,  but 
eventually  we  came  in  and  took  our  share  with  the  rest  and  carried  it 
on  until  the  arrangement  expired;  whatever  the  agreement  was  we  all 
carried  it  out. 

It  may  not  be  amiss,  while  on  the  subject  of  the  subsidy  to  the 
Canadian  Pacific  road  for  the  year  1891  to  reiterate  the  fact,  first,  that 
W*  were  not  the  originators  of  that  plan.  The  Canadian  Pacific  Com- 
pany did  not  go  to  the  other  lines  and  say,  "Pay  us  something  to  stay 
out/'  It  was  the  other  lines  who  came  to  the  Canadian  Pacific  to  nego- 
tiate and  finally  agreed  that  they  would  pay  this  sum  and  before  the  ex- 
piration of  the  year  many  of  these  lines  were  willing  and  anxious  to 


renew  it — to  renew  the  arrangement  for  another  year,  perhaps  with  some 
modification  as  to  sum  and  so  on,  but  others  of  the  lines — I  think  some  of 
those  that  had  the  least  interest  too,  in  the  arrangement, — objected,  and 
it  fell  through.  It  was  not  renewed  after  the  expiration  of  1891. 

The  question  as  to  whether  there  had  ever  been  an  agreement  as 
between  the  Canadian  Pacific  and  the  American  lines  as  to  the  Canadian 
Company's  differentials,  has  been  discussed  at  considerable  length  and  in 
the  main  denied  by  the  representative  of  the  American  lines,  even  in 
the  face  of  the  records — the  clear  records — filed  with  your  Board,  of  the 
New  York  and  Milwaukee  meetings  held  in  '96 — March  and  April,  1896, 
where  they  simply  fell  on  a  technicality,  that  because  the  act  of  one  com- 
pany for  reasons  good  and  sufficient  unto  themselves,  prevented  the 
completion  of  the  proposed  association  and  confirmation  of  the  agree- 
ments all  around.  I  think  you  will  agree  with  me,  gentlemen,  that  that 
is  a  mere  technical  evasion.  The  records  speak  for  themselves.  There 
wras  an  agreement.  There  was  an  agreement  at  the  beginning — the 
agreement  being  the  outcome  of  proper,  honest  business  negotiations. 
Negotiations  of  that  kind  you  are  all  familiar  with.  It  would  be  pre- 
sumptuous in  me  to  enlarge  upon  the  point.  There  was  no  idea  in  the 
mind  of  the  Canadian  Pacific  as  to  shot-gun  policy,  or  ruthless  destruc- 
tion of  revenue.  At  the  inception,  the  question  was  one  of  ordinary  busi- 
ness negotiations;  at  the  close  in  1896,  when  we  may  say  our  straight 
connections  with  the  Trans-Continental  lines  ceased,  by  reason  of  the  fall- 
ing to  pieces  of  this  proposed  Association  not  being  formed,  there  is  a 
complete  record  of  agreement,  as  between  the  American  lines  and  the 
Canadian  Pacific.  Since  that  time,  although  not  associated  with  them 
directly  in  the  various  organizations  that  they  have  perfected,  we  have 
worked  with  them  closely  and  in  perfect  touch  all  the  time.  When  the  old 
Association  dissolved,  at  the  end  of  1892,  as  already  explained,  we  adopted 
the  flexible  plan  of  differentials  on  a  percentage  basis.  There  was  not 
any  serious  objections  offered  to  that,  at  the  time.  We  have  been  in 
meeting,  off  and  on,  with  those  lines  ever  since,  and  to  my  knowledge,  I 
do  not  think  there  is  any  record  of  protest  with  this  Company  against 
the  adoption  of  the  10  per  cent  differential  plan,  until  about  one  year 
ago,  when,  at  a  meeting  in  Chicago,  something  was  said  of  rather  an 
indefinite  character  on  the  question  of  our  differentials.  Again,  in 
March  and  April  of  this  year,  the  question  was  raised  at  a  meeting.  Again, 
in  May,  the  question  was  raised,  evidently  a  concerted  plan  to  make  a 
record.  They  had  got  to  act  and  they  built  up  there  a  structure  on  which 
they  could  remove  our  differentials  and  destroy  us  so  far  as  the  California 
traffic  was  concerned. 

I  think  it  will  be  remembered  that  the  representative  of  the  American 
lines  insinuated  that  the  failure  of  the  Union  Pacific  to  finally  agree  to 
the  proposed  formation  of  the  Trans-Continental  Association,  in  1896, 


1 66 

was  due  to  the  question  of  differentials  with  the  Canadian  Pacific 
Company;  differentials  of  9  per  cent,  the  compromise  differential  of  9 
per  cent.  Mr.  Stubbs  is  too  clever  to  make  that  statement  out  straight, 
because  he  knows  that  it  is  not  so.  He  knows,  I  know,  and  I  think  prob- 
ably nearly  every  gentleman  in  this  room  knows,  with  all  reasonable 
degree  of  certainty,  without  really  being  behind  the  scenes  and  having 
the  records  in  our  hands,  the  reason  why  the  Union  Pacific  Receivers  failed 
to  confirm  the  action  of  their  traffic  representative  in  agreeing  to  the 
formation  of  that  Association.  The  reasons  were,  stated  briefly  and  in 
general,  that  they  were  advised  that  they  were  taking  some  risk  under 
their  personal  bonds  in  assuming  to  join  in  the  payment  of  the  Panama 
route  proposed  subsidy,  and  as  they  were  not  prepared  to  take  that  risk, 
consequently  they  failed  to  confirm  the  action  of  their  chief  traffic  officer 
in  the  New  York  and  Milwaukee  meetings. 

As  has  already  been  stated  and  explained  at  some  length,  a  meeting 
was  called  in  Denver,  Colo.,  to  be  convened  August  22nd,  last,  for  the 
purpose,  as  was  explained  in  the  call,  of  considering  the  question  of 
Canadian  Pacific  differentials  in  connection  with  them,  as  being  an  ele- 
ment going  towards  the  disturbance  of  the  rate  market.  Now,  it  says. 
"Westbound  rate  conditions  have  become  so  demoralized — 

ARBITRATOR  DAY— What  says  that,  the  call  for  the  meeting? 

MR.  KERR — No  sir;   Mr.  Stubbs'  presentation  of  his  case. 

ARBITRATOR  DAY— I  thought  you  said  that  that  was  in  the  call 
for  the  meeting? 

MR.  KERR— Sir? 

ARBITRATOR  DAY— I  thought  you  said  it  was  in  the  call  for  the 
Denver  meeting. 

MR.  KERR— Yes,  I  take  it  as  really  a  rehearsal  of  the  call.  This  is 
a  copy  of  the  call  sent  to  the  Canadian  Pacific  Road. 

ARBITRATOR  MIDGLEY— Who  sent  that? 

MR.  KERR— Mr.  Stubbs. 

"Westbound  rate  conditions  have  become  so  demoralized  by 
attempts  to  meet  Canadian  Pacific  differentials  that  I  think  the 
domestic  Trans-Continental  lines  should  immediately  decide  upon 
a  settled  policy  to  be  pursued  uniformly  by  all,  either  to  abandon 
sporadic  efforts  to  equalize  Canadian  Pacific  rates  and  strictly 
maintain  published  tariffs,  submitting  to  large  diversions  to  Cana- 
dian line,  or  to  formally  notify  Canadian  Pacific  that  United 
States  lines  will  no  longer  submit  to  its  demand  that  they  shall 
make  higher  rates,  and  then  proceed  jointly  by  published  rates  to 
)  meet  whatever  action  Canadian  Pacific  takes.  The  importance  of 
this  question  merits  the  attention  of  the  highest  officers  of  lines 
engaged  in  California  traffic  with  the  east.  Will  you  attend  a 


i67 

meeting  at  Denver  on  Monday  22nd  inst.,  for  the  purpose  of  dis- 
cussing and  disposing  of  this  question?" 

I  wish  to  amend  the  record  when  I  stated  that  this  is  a  copy  of  the 
call  sent  to  the  Canadian  Pacific  Company.  I  did  so  because  it  is  so 
stated  here  in  Mr.  Stubbs'  evidence.  But  my  recollection  is  that  this  call 
was  not  sent  to  the  Canadian  Pacific  Company.  The  one  that  was  sent  to 
us  was  of  very  different  wording,  but  it  did  say  that  the  reasons  for  calling 
the  meeting  were  to  consider  the  situation  in  connection  with  the  Cana- 
dian Pacific  differentials.  The  call  is  before  you  and  I  am  not  pretending 
to  give  the  exact  reading  of  it. 

Now,  when  we  get  into  meeting  at  Denver,  having  been  told  what 
terrible  fellows  we  were  and  the  dreadful  things  we  were  doing,  what  do 
we  find?  After  the  discussion  had  fairly  gotten  under  way,  pro  and  con, 
as  to  the  situation,  the  representative  and  chief  traffic  officer  of  the  Union 
Pacific  pointed  out  that  it  is  no  secret  at  all  that  the  roads  east  of  the 
Missouri  River  and  the  Mississippi  River,  on  Trans-Continental  business, 
are  in  a  very  demoralized  condition,  and  that  the  through  rate  from  New 
York  to  San  Francisco  can  be  cut  through  causes  entirely  foreign  to  the 
Canadian  Pacific  differential.  This  was  a  fact  patent  to  us  all.  We  all 
knew  it,  and  the  following  resolution  was  adopted: 

"RESOLVED,  that  a  Committee  of  five  of  the  Trans-Con- 
tinental lines  be  appointed  to  confer  with  a  Committee  or  such 
organization  as  they  have,  of  the  Central  Freight  Association  and 
the  Trunk  Lines  for  the  purpose  of  arranging,  if  possible,  to  stop 
present  demoralization  in  Trans-Continental  California  and  North 
Pacific  Coast  freight  rates.  If  said  Committee  reports  satisfactory 
arrangements,  it  then  to  be  understood  that  all  lines  here  repre- 
sented are  pledged  to  restore  rates  from  all  territories  on  such  day 
as  Secretary  Countiss  may  fix." 

Now,  here  is  a  situation  developed  that  shows  that  the  Canadian  Pa- 
cific differentials  are  in  no  way  responsible  for  the  demoralization  of  these 
rates.  It  is  well  and  publicly  known  that  the  connecting  lines  east  of  the 
Missouri  River  do  shrink  their  proportion  of  their  earnings.  It  is  well 
known  that  the  Trans-Continental  lines  do  accept  those  shrunken  propor- 
tions or  earnings  and  add  them  on  to  the  proportions  of  a  through  rate 
west  of  the  Missouri  River,  with  which  to  cut  the  agreed  published  through 
rates  of  the  Trans-Continental  Association,  and  in  doing  that  naturally 
they  wipe  out  and  destroy  the  Canadian  Pacific  differential.  Will  anybody 
say  that  the  disturbance  on  all  these  lines  in  the  Central  Freight,  in 
the  Western  and  in  the  Trunk  Lines'  territory,  is  caused  by  the  Cana- 
dian Pacific  Trans-Continental  differential  on  California  business? 


1 68 

Surely,  no  man  would  say  so  who  knows  anything  about  the  situation. 
Furthermore,  the  demoralization  caused  by  this  condition  of  affairs  in 
this  territory  east  of  the  Missouri  River,  is  not  confined  to  California;  it 
extends  to  the  North  Pacific  Coast.  It  carries  all  along  Portland  and 
north;  points  with  which  we  have  never  had  our  rail  line  differentials,  and 
never  asked  for  them.  Does  the  Canadian  Pacific  differential  to  San 
Francisco  cause  all  of  these  lines  down  here  to  shrink  their  rates?  Surely, 
you  will  never  believe  it. 

The  representative  of  the  American  lines  claims  that  the  American 
lines  are  united;  that  they  are  welded  together  as  one  line  on  this 
subject;  that  the  Canadian  Pacific  stands  alone  as  the  only  one  seeking 
for  differential  privileges.  In  making  that  statement  he  may  be  in  a 
measure  right,  but  he  does  not  take  you  gentlemen  into  his  confidence 
and  tell  you  why  it  is  so,  if  it  is  so.  In  the  first  place  the  American 
lines  are  not  a  unit  on  this  subject,  any  more  than  they  are  a  unit  on 
many  other  subjects.  The  Great  Northern  Company  and  the  Union 
Pacific  Company  are  not  a  unit  on  this  arbitration.  The  representative  of 
the  American  lines  does  not  represent  those  companies,  as  I  understand 
it.  They  have  withdrawn.  In  the  first  place,  the  Great  Northern  Com- 
pany refused  their  invitation  to  come  in  and  join  in  this  question  of 
arbitration;  for  reasons,  I  suppose,  that  are  good  and  sufficient  unto 
themselves.  The  Union  Pacific  by  their  accredited  representative,  the 
chief  traffic  officer  voted  "aye"  on  this  arbitration  resolution  at  the 
Denver  meeting,  but  for  reasons  good  and  sufficient  unto  themselves, 
their  President  over-ruled  his  action.  That  put  them  out  of  Court  so  far 
as  this  arbitration  case  is  concerned.  What  their  opinions  are  can  cut 
no  figure  whatever  in  this  case.  The  Great  Northern  never  entered  Court. 
What  their  opinions  are  can  cut  no  figure  in  this  case.  The  American 
lines  are  not  a  unit  on  this  subject,  as  they  are  not  a  unit  on  many  other 
subjects. 

Now,  why  do  we  stand  alone  in  asking  differentials  on  California 
business?  We  stand  alone  for  the  reason  that  the  differential  is  the  only 
means  whereby  we  can  obtain  any  share  of  this  traffic.  The  others,  the 
Great  Northern  and  Northern  Pacific,  cited  so  extensively  by  our  friend 
on  the  other  side  of  this  case,  receive  their  quid  pro  quo  for  keeping  out 
of  California  business  by  the  ocean  route.  The  representative  of  the 
American  lines,  with  a  display  of  a  good  deal  of  feeling,  denied  that  there 
was  any  such  agreement;  denied  my  statement  that  there  had  been  a  trade 
and  falls  on  the  technicality  that  what  was  agreed  to  at  the  New  York 
and  Milwaukee  meetings  not  having  been  confirmed  could  not  be  re- 
garded— a  mere  technicality.  As  a  matter  of  fact  we  know,  or  rather  we 
think  we  know — and  pretty  often  you  are  right  when  you  think  you  know 
— that  that  agreement  of  Milwaukee  and  New  York  in  1896  is  being 
operated  under  today. 


169 

ARBITRATOR  WASHBURN— In  its  entirety  or  in  part,  Mr.  Kerr? 

MR.  KERR — To  the  extent,  with  possibly  some  exceptions,  that  the 
California  lines  do  not  work  up  into  Puget  Sound,  north  of  Portland; 
they  do  not  work  actively;  they  do  not  care  for  the  business,  so  long 
as  the  Northern  lines  will  not  work  actively  for  California  business.  Pre- 
cisely on  the  same  basis,  you  might  say,  for  the  same  principle  will  apply, 
when  the  Canadian  Pacific  Company  had  the  subsidy  they  put  their  rates 
on  a  parity  with  the  other  lines  with  the  result  that  it  completely  dammed 
up  and  stemmed  the  flow  of  traffic  to  and  from  California  by  the  Canadian 
Pacific  road.  Consequently,  the  two  northern  lines  maintain,  in  the  same 
way,  the  full,  published  all-rail  tariff  by  their  ocean-and-rail  routes,  and 
they  get  no  business.  On  the  other  hand,  the  California  lines  do  not  get 
very  much  business  in  Puget  Sound;  do  not  seek  for  it  very  actively, 
do  not  look  for  it.  I  beg  permission  to  quote  from  the  proceedings  of  the 
Trans-Continental  Association,  "General  Meetings  New  York  and  Mil- 
waukee, 1896."  These  are  the  meetings  when  it  was  proposed  to  form 
this  Association  and  failed.  On  page  17 — you  have  a  copy  of  this  filed 
with  you — the  resolution  reads : 

"RESOLVED,  that  the  California  lines,  i.  e.  those  lines  which 
must  work  through  or  via  California,  to  reach  Portland  and  other 
North  Pacific  Coast  points,  hereby  agree  not  to  publish  tariffs 
or  to  solicit  business  between  Portland  and  North  Pacific  Coast 
points,  on  the  one  hand,  and  points  in  the  eastern  Trans-Con- 
tinental territory  on  the  other  hand,  but,  on  the  contrary,  to  with- 
draw from  participation  in  said  business. 

In  consideration  whereof,  the  North  Pacific  Coast  lines,  i.  e. 
those  lines  which  must  work  through  or  via  North  Pacific  Coast 
points,  from  Portland  to  Vancouver — Vancouver  excepted — to 
reach  California  (it  being  expressly  understood  that  the  Canadian 
Pacific  Railway  Company  is  excepted  from  this  provision),  hereby 
agree  not  to  publish  tariffs  or  to  solicit  business  between  Califor- 
nia points  and  points  in  the  eastern  Trans-Continental  territory, 
but,  on  the  contrary,  to  withdraw  from  participation  in  such  busi- 
ness. 

It  being  understood  that  either  party  may  call  upon  the  other 
to  publish  tariffs  on  a  sufficiently  higher  scale  than  those  carried  by 
the  direct  lines,  to  give  full  force  and  effect  to  the  agreement  em- 
braced in  this  resolution." 


MR.  STUBBS— Was  that  resolution  adopted? 

MR.  KERR — That  resolution  was  adopted  at  that  meeting.    It  says: 
'After  full  discussion,  the  following  was  offered  and  adopted." 


MR.  STUBBS— I  just  wanted  to  get  it  fully  before  the  Board.  That 
was  at  the  Milwaukee  meeting,  as  I  understand? 

MR.  KERR — That  was  the  Milwaukee  meeting.  Now,  my  under- 
standing is  that  the  Northern  lines  are  acting  on  that;  the  California 
lines  are  acting  on  that  today,  with  possibly  some  modifications.  I  think 
there  has  been  an  arrangement  made  whereby  the  Northern  Pacific  works 
certain  lines  of  traffic,  all-rail,  out  and  into  San  Francisco,  via  the  "Shasta 
Line"  of  the  Southern  Pacific  Company,  from  Portland  to  San  Francisco. 
Possibly  there  may  be,  also,  an  arrangement  whereby  the  Great  Northern 
line  may  work  certain  lines  of  traffic,  through  Spokane,  over  their  con- 
nections, the  Oregon  Railroad  &  Navigation  Co.  to  Portland,  thence  to 
San  Francisco.  There  is  a  large  fruit  traffic  that  will  not  take  the  ocean 
route.  There  are  various  kinds  of  traffic  that  must  have  an  all-rail  outlet; 
that  cannot  be  handled  otherwise.  Now,  the  Canadian  Pacific  can  get  no 
advantages  of  this  kind.  They  are  up  on  the  extreme  north. 

The  suggestion  was  made  by  Mr.  Stubbs  that  we  should  seek  an  all- 
rail  inlet  and  outlet  on  the  San  Francisco  traffic.  Mr.  Stubbs  was  not  in 
earnest  when  he  said  that,  I  am  mind-reader  enough  to  know  that.  He 
knows  the  impossibility,  the  practical  impossibility  of  the  Canadian  Pacific 
Company  making  an  arrangement  to  work  their  traffic  all-rail  over  three 
companies  and  pay  each  one  of  those  individual  companies  a  proportion 
oiit  of  what  is  a  very  low  and  practically  non-paying  through  rate  on 
many  of  the  lines  of  traffic  that  we  now  have  to  carry.  To  use  that 
through  line,  would  mean  a  loss  to  the  Canadian  Pacific  Company  and  if 
those  three  connecting  lines  from  Huntington,  B.  C.,  or  Sumas,  Wash., 
— those  are  the  two  points  of  junction  where  the  Seattle  &  International 
road,  and  the  Canadian  Pacific  road  join, — from  that  point  down,  if  they 
were  willing  to  accept  their  proportion  of  the  pro  rata  per  mile,  or  pro- 
rata  per  rate,  it  would  not  pay  them,  they  would  not  make  any  money ; 
they  would  be  better  without  the  traffic  and  so  would  we.  Now,  Mr. 
Stubbs  ignores  all  practical  workings  in  dealing  with  this  question,  and 
endeavors  to  create  the  impression  on  the  Board  that  that  all-rail  line 
from  Sumas  to  San  Francisco,  is  a  very  easy  proposition  for  us  to  come 
in  and  accept.  If  we  pay  those  three  companies  a  reasonable  proportion, 
sufficient  on  which  to  give  them  a  margin  of  profit,  we  would  suffer  a  dead 
loss;  and  he  asks  the  question  why,  if  we  can  reach  1000  miles  in  the  south 
and  east  for  business,  and  pay  the  rates  up  to  our  connection  at  St.  Paul 
and  Minneapolis,  why  cannot  we  also  pay  for  carrying  our  business  an- 
other 1000  miles  on  connecting  roads  at  the  western  end. 

The  published  rate  on  rails  from  Pittsburgh  to  San  Francisco  is  75 
cents.    That  is  the  published  rate. 

ARBITRATOR  DAY— How  do  you  carry  that  traffic,  Mr.  Kerr? 
MR.  KERR— If  we  had  to  take  even  that  75  cents  and  pay  for  1000 


miles  haul  on  the  one  end  and  1000  miles  haul  on  the  other,  would  not 
we  be  better  without  the  business? 

ARBITRATOR  DAY— What  is  your  route  from  Pittsburgh? 

MR.  KERR — Oh,  various  lines.  We  get  up  in  the  usual  way,  just 
as  the  others  do. 

ARBITRATOR  DAY— Up  to  St.  Paul? 

MR.  KERR— Yes,  to  Chicago  and  St.  Paul. 

ARBITRATOR  DAY— I  was  wondering  whether  you  carried  that 
business  by  way  of  Detroit? 

MR.  KERR— Oh,  no. 

Therefore,  we  must  look  at  this  question  from  a  practical  standpoint 
and  stop  theorizing.  We  could  not  possibly  afford  to  carry  the  business 
by  the  all-rail  line,  under  even  very  favorable  offers  of  proportions  and 
division.  Furthermore,  we  have  other  obstacles  in  the  way.  I  think  the 
representative  of  the  American  lines  stated — if  he  did  not  do  so  he  can 
correct  me — that  we  had  an  all-rail  line  into  Portland,  Ore.,  and  that  the 
Northern  Pacific  line  was  open  to  us ;  that  we  had  it  at  the  start  and  we 
have  it  now. 

MR.  STUBBS— No,  I  did  not  say  you  had  it  at  the  start.  I  said  quite 
to  the  contrary. 

MR.  KERR — Well,  when  the  rails  were  connected  through  from 
Sumas. 

MR.  STUBBS— Yes. 

MR.  KERR — We  could  not  have  it;  of  course,  if  the  rails  were  not 
there  we  could  not  have  it.  I  meant  when  the  rails  were  connected.  Now, 
the  information  that  he  has  gathered  on  that  head  is  wrong.  We  have 
not  had  an  all-rail  line  into  Portland;  not  for  freight  business.  We  have 
no  passengers.  The  Northern  Pacific  would  not  take  our  business  into 
Portland.  The  very  best  that  the  Northern  Pacific  would  ever  do  with  us 
was  to  let  us,  for  a  period,  into  Tacoma,  42  miles  from  Seattle  and  two 
or  three  years  ago  they  cut  that  off,  and  they  will  not  let  our  cars  roll 
one  foot  south  of  Seattle  on  their  tracks  even  by  paying  their  local  rates. 

Now,  assuming  that  Mr.  Stubbs  in  charge  of  the  Southern  Pacific 
Company,  should  say  to  the  Canadian  Pacific  Company:  "Come  and  form 
a  rail-line  over  our  "Shasta  Route"  and  we  will  give  you  such  propor- 
tions as  you  can  work  under."  We  have  no  means  of  bridging  that  185 
or  187  miles  between  Seattle  and  Portland;  we  could  not  accept  his  kind 
offer,  and  today  we  cannot  move  business  south  of  Seattle  on  the  North- 
ern Pacific  road,  and  we  never  have  been  able  to  move  business  south 
of  Tacoma  on  the  Northern  Pacific.  I  am  speaking  purely  of  freight,  of 
course.  Now,  I  think  that  fairly  disposes  of  the  question:  "Why  do  you 
not  come  and  form  an  all-rail  line?" 

ARBITRATOR  DAY— What  objection  can  the  Northern  Pacific  in- 
terpose to  your  getting  in  there? 


172 

MR.  KERR — They  will  not  have  another  competitor  in  territory  that 
they  can  hold  to  themselves. 

ARBITRATOR  DAY— Did  you  offer  to  do  it?  You  heard  Mr. 
Stnbbs'  statement  yesterday. 

MR.  KERR — We  have  never  discussed  the  propriety  of  working  San 
Francisco  business,  but  the  Northern  Pacific  would  never  allow  us  to 
work  into  Portland ;  it  never  would  allow  us  to  use  their  line.  They  will 
not  today.  They  would  not  take  a  car  of  San  Francisco  freight  from  us 
today  any  more  than  they  would  take  a  car  of  Tacoma  or  Portland  freight 
from  us  today.  They  will  not  do  it,  because  they  do  not  want  another 
competitor  in  the  territory  that  they  have  local  to  themselves. 

MR.  STUBBS— Well,  now,  is  not  that  new  matter  Mr.  Kerr? 

MR.  KERR— No  sir. 

MR.  STUBBS — I  have  not  said  anything  about  that  business. 

MR.  KERR — It  is  in  connection  with  this  whole  question. 

MR.  STUBBS — I  make  the  distinct  assertion  that  you  never  have 
approached  the  Northern  Pacific  Company  to  form  an  all-rail  through 
line  to  San  Francisco,  equitably,  with  an  offer  to  abandon  your  differen- 
tials. I  have  not  discussed  Portland  business  or  your  relations  with  the 
Northern  Pacific  into  Portland,  except  on  the  basis  that  you  work  there ; 
on  the  basis  according  to  rates. 

MR.  KERR — I  do  not  know  that  it  is  an  important  point  but  the 
statement  was  made  that  the  Seattle  &  International  Ry.  was  an  inde- 
pendent road.  In  order  to  make  the  record  accurate,  I  would  say  that  the 
Seattle  &  International  Ry.  is  owned  and  controlled  by  the  Northern 
Pacific  Railway  Company.  They  acquired  the  control  of  that  road  some 
months  ago — I  have  forgotten  how  many,  but  it  was  some  months  ago — 
in  the  beginning  of  the  year,  I  think.  Previous  to  that  the  Seattle  & 
International  Ry.  was  an  independent  road  for  a  period  and  during  that 
period  the  Canadian  Pacific  Company  made  a  traffic  contract  with  it  for 
the  handling  of  traffic  between  Seattle  and  other  points  on  its  line.  Our 
connection  is  at  Sumas,  and  the  contract  or  agreement,  which  has  still 
some  years  to  run,  covers  both  through  and  local  traffic,  passengers  and 
freight.  Were  it  not  for  that,  I  am  not  so  sure  but  what  we  would  not  be 
able  to  put  our  cars  into  Seattle  today  over  that  road. 

In  connection  with  the  statement  that  the  Northern  Pacific  and  Great 
Northern  by  their  ocean-and-rail  lines,  do  not  demand  a  differential,  but 
that  they  actually  operate  those  lines  on  a  parity  of  rates — equality  oi 
rates — with  the  all-rail  routes — Trans-Continental  roads.  I  explained 
the  reason  why  the  Great  Northern  and  Northern  Pacific  published  equal 
rates  by  their  ocean  routes  and  to  show  you  how  very  effectually  that 
plan  is  in  stemming  back  traffic  if  you  demand  the  same  money  for 
carrying  an  amount  of  goods  by  that  broken  ocean-and-rail  route,  as 
against  the  other  fellow  who  has  a  direct  rail  line  to  offer,  I  quote  from 


a  statement  of  "Expenses  of  Inspection  of  Westbound  Trans-Continental 
shipments  reaching  San  Francisco  via  Pacific  Coast  Steamship  Company 
and  Oregon  Railroad  &  Navigation  Company  Steamers;" — that  is, 
handed  to  this  steamer  line  by  the  Canadian  Pacific,  the  Great  Northern 
and  the  Northern  Pacific  and  the  Oregon  Railroad  &  Navigation  Coni- 
pany^-theirs  is  a  railway  up  to  their  Ocean  Division.  I  might  add  that 
it  was  agreed  that  we  would  submit  to  the  general  system  of  inspection 
that  obtains  in  California  in  order  to  check  classification  and  weights  and 
to  charge  up  and  all  that  sort  of  thing  that  you  are  familiar  with.  We 
and  these  other  lines  named  agreed  to  go  in  under  this  inspection  and 
share  on  a  certain  basis  in  the  expenses  in  connection  with  the  inspection 
— the  salaries  and  so  on.  I  quote  the  following  percentages  of  business 
carried: 

1898   Can.Pac.Ry.    Gt.Nor.Ry.    Nor.Pac.Ry.    O.R.&N.Co. 

January  .9274          .0307  .0419 

February  .9924  .0007  .0065  .0004 

March  .9814          .0185  .0001 

April  .9906          .0009  .0085 

May  .9498         .0502 

June  .9848  .0007  .0145 

July  .9846  .0002  .0152 

Now,  it  will  be  seen  from  that  statement  that  those  lines  are  prac- 
tically all  out  of  Trans-Continental  San  Francisco  business.  They  are 
not  "in  it."  Why?  Because  they  do  not  want  to  be  in  it;  it  is  not  to 
their  interest  to  be  in  it.  The  Union  Pacific  will  not  work  San  Francisco 
business  through  their  Portland  water  gate-way;  if  they  did,  would  they 
not  at  once  get  into  serious  trouble  with  our  esteemed  friend  here?  If  the 
Denver  &  Rio  Grande  system  began  working  San  Francisco  business 
through  the  Portland  gate-way,  would  they  not  get  into  the  same  trouble? 
The  fact  of  the  matter  is,  that  these  various  lines  are  either  influenced  by 
a  club  or  they  are  bought  off.  In  the  case  of  the  Northern  Pacific  and 
Great  Northern,  they  are  bought  off.  In  the  case  of  the  Union  Pacific 
and  the  Rio  Grande  System — (Speaker  here  made  motions  as  if  swinging 
a  club) — that  accounts  for  why  the  Canadian  Pacific  stands  alone  on 
this  question  of  differentials. 

ARBITRATOR  WASHBURN— Have  you  finished  on  that  point? 

MR.  KERR— Yes  sir. 

ARBITRATOR  WASHBURN— As  it  is  nearly  one  o'clock,  we  had 
better  adjourn  until  half  past  two  o'clock  this  afternoon. 

An  adjournment  was  here  taken  to  2:30  P.  M.  of  the  same  day. 


174 


Afternoon  Session,  October  15,  1898,  2:30  P.  M. 
The  meeting  convened  pursuant  to  adjournment. 

ARBITRATOR  WASHBURN— Mr.  Kerr  will  resume  his  argument. 

MR.  KERR — Mr.  Chairman  and  Gentlemen:  When  we  adjourned 
I  had  disposed  of  the  case  and  given  you  the  reasons  why  the  Cana- 
dian Pacific  stood  alone  on  the  question  of  differentials  into  San  Fran- 
cisco, and  now  with  your  permission  I  will  touch  upon  a  point  raised. 
Mr.  Stubbs  in  his  argument  stated  that  we  were  suffering  under  a  dis- 
ability on  the  east  end  of  our  line.  Mr.  Stubbs  says  that  the  Atlantic 
Seaboard  traffic  is  moved  by  the  Canadian  Pacific  via  Montreal  and  what 
he  calls  its  Sudbury  line,  meaning  its  main  line  via  the  north  shore  of 
Lake  Superior  through  Fort  William  and  Winnipeg  to  the  west.  If  I 
understand  him  correctly,  he  is  trying  to  pull  us  from  the  west  end 
where  our  disabilities  really  exist  down  into  the  east  where  thej  do  not 
exist  and  he  states  that  although  ostensibly  we  are  asking  differentials 
in  connection  with  our  ocean  line,  that  really  they  are  to  overcome  dis- 
abilities in  connection  with  our  all-rail  line  around  the  north  shore  of 
Lake  Superior.  That  is  my  understanding  of  his  meaning  in  the  manner 
in  which  he  puts  the  case  and  I  want  to  say  right  here  that  I  think  he 
knows  better  than  that.  We  do  not  claim  to  have  any  disabilities  on  the 
east  end  of  our  line,  where  we  are  operating  rail  and  wheel ;  we  do  not 
claim  disabilities  and  consequently  we  do  not  claim  differentials.  Our 
disability  rests  on  the  west  end  with  our  ocean  connections.  The  broken 
route,  the  extra  handling,  the  prejudice  in  the  minds  of  shippers  as 
against  using  such  a  route,  the  necessarily  longer  time  that  it  takes  to 
get  goods  forward  on  such  a  route  and  the  various  other  reasons  that  I 
have  already  specified.  I  will  not  take  up  your  time  to  recount  them. 

The  next  point  I  desire  to  touch  upon  is  that  of  equality  in  rates.  As 
baldly  stated  without  explanation  and  without  regard  to  circumstances 
surrounding  particular  cases,  it  looks  fair  and  it  is  fair  when  not  applied 
practically  as  between  broken  rail-and-water  lines  and  direct  all-rail 
lines  and  of  equality  in  rates  by  every  line  crossing  this  continent;  by  all 
lines  throughout  this  whole  country  east  and  west  of  the  Missouri  River 
section  that  are  traversed  by  both  lake-and-rail  and  by  all-rail  lines; 
sections  that  are  filled  full  with  differential  lines;  differential  lines  because 
they  suffer  under  these  disabilities  that  I  have  described  over  and  over 
again.  Now,  carried  to  a  logical  conclusion  what  is  the  effect  of  equality 
in  rates  between  all  of  these  broken  rail-and-water  lines  and  all-rail  lines? 
Will  it  not  have  the  effect  of  throwing  the  tonnage  and  the  revenue  over 


175 

onto  the  strong  all-rail  lines?  Will  it  not  have  the  effect  of  largely  de- 
stroying the  weaker  rail-and-water  lines?  Will  it  not  have  the  effect  of 
taking  from  the  weak  and  giving  to  the  strong;  to  the  lines  that  are 
already  strong  and  increasing  the  weakness  of  those  that  are  already  weak 
and  what  becomes  of  the  people  who  have  their  money  tied  up  in  those 
weak  lines?  What  becomes  of  the  people  who  are  served  by  these  line? 
through  which  they  enjoy  a  competition  in  traffic?  Gentlemen,  I  hold 
that  the  whole  argument  as  advanced  by  the  representative  of  the  Ameri- 
can lines  in  this  case  is  fallacious  and  wrong.  I  do  not  agree  with  him 
on  the  point  and  I  do  not  think  that  he  can  make  any  level  headed  traffic 
man  believe  that  the  perfect  equality  of  rates  does  not  mean  just  what  I 
have  said,  if  carried  to  its  logical  conclusion. 

Now,  taking  that  to  be  correct,  what  'becomes  of  the  Canadian  Pacific 
line  in  connection  with  San  Francisco  traffic?  If  we  are  forced  to  adopt 
equal  rates  with  the  strong  direct  lines?  It  goes  without  saying,  that  we 
must  abandon  the  business,  or,  rather,  that  the  business  will  abandon  us. 
That  will  fit  the  case  of  our  friend  here.  He  would  like  to  see  a  com- 
petitor removed.  He  does  not  care  whether  that  competitor  is  a  Cana- 
dian road  or  an  American  road.  He  would  remove  that  competitor,  if  he 
had  the  power  to  do  so,  with  the  utmost  cheerfulness,  but  that  does  not 
suit  the  rest  of  us;  it  does  not  suit  the  public;  it  does  not  suit  the  people 
of  the  United  States  to  have  any  line  removed  from  the  field  as  a  com- 
petitor for  business — for  traffic. 

Now,  the  argument  has  been  freely  advanced  and  dwelt  upon,  that 
the  differentials  of  the  Canadian  Pacific  road  are  a  disturbing  element  and 
that  they  cause  a  general  demoralization  of  rates.  Applying  the  general 
principle  of  that,  and  weighing  the  lake-and-rail  routes  as  against  the  all- 
rail  routes,  down  in  this  section — I  mean  the  lake  section,  from  the  At- 
lantic Seaboard  to  Chicago,  if  you  like — if  the  differential  of  the  Cana- 
dian Pacific  line  on  the  San  Francisco  business,  is  a  general  disturber 
of  rates,  then  the  lake-and-rail  differentials  of  the  lake  lines  here,  must 
also  be  a  general  disturber  of  rates,  but  do  we  not  often  find  that  during 
the  season  of  closed  navigation  on  these  lakes,  when  no  steamers  are 
operating,  do  we  not  find  that  there  is  often  a  greater  demoralization  in 
rates  during  the  winter  season  when  the  lake-and-rail  differential  lines  are 
not  in  operation?  It  is  .not  because  of  the  differential  rates.  As  Mr. 
Stubbs  has  said,  differential  rates  mean  agreed  rates,  and  when  rates  are 
agreed  to  they  should  be  maintained.  The  statement  has  been  made  that 
agreed  rates,  differential  and  all-rail,  full  tariff,  being  on  the  market 
at  the  same  time,  the  inducement  to  the  man  who  represents  the  all-rail 
line  in  canvassing  for  business  is  so  great  in  his  greed  and  grasp  for 
business  for  his  line,  that  he  is  never  strong  enough  to  resist  the  tempta- 
tion to  use  the  differential  rate  of  his  weaker  brother  and  apply  it  on  his 
own  strong  line.  And  this  principle  is  advanced  as  an  argument,  has 


176 

been  on  many  occasions,  why  the  differential  rates  of  the  Canadian  Pa- 
cific should  be  done  away  with,  because  they  were  a  temptation — too 
great  a  temptation — to  the  representatives  of  the  other  lines  to  maintain 
their  tariffs.  Those  gentlemen  can  withstand  anything  except  tempta- 
tion, and  I  do  not  think  it  is  a  good  argument,  not  if  these  strong  lines  in- 
tend that  those  rates  shall  be  maintained,  and  the  executive  and  chief 
traffic  officers  of  those  lines  make  their  orders  imperative  to  their  sub- 
ordinates that  they  must  and  shall  be  maintained,  so  that  those  sub- 
ordinates thoroughly  understand  that  their  weak  brother  here  on  the 
right,  with  his  lake-and-rail  line,  has  been  accorded  a  differential,  and 
that  that  shall  be  respected.  Will  that  man  disobey  orders?  Not  if  he 
values  his  job.  The  trouble  is,  they  do  not  receive  those  orders,  and  the 
representative  of  the  strong  line  falls  under  the  temptation.  He  uses 
the  differential  rate  and  that  is  the  destruction  of  the  whole  revenue  on 
the  traffic.  That  is  not  the  fault  of  the  differential  line.  It  is  the  fault  of 
the  other  fellow,  yet  they  would  seek  to  hold  us  responsible  for  the  con- 
ditions. 

This  morning  Mr.  Stubbs  took  exception  to  my  mentioning  Portland 
rates,  on  the  ground  that  it  was  not  in  the  case  and  should  not  be  re- 
ferred to.  I  find,  on  his  own  record  that  he  makes  a  very  plain  refer- 
ence to  Portland.  Mr.  Stubbs  says: 

"It  may  be  that  the  Canadian  line  will  give  as  a  reason  for  not 
using  the  all-rail  line,  that  the  Northern  Pacific  between  Seattle 
and  Portland  is  not  open  to  its  use  for  San  Francisco  business 
upon  reasonable  terms,  or  upon  terms  which  it  can  afford  to  pay. 
It  pays  the  terms  from  all  these  points  in  this  country  (indicating 
on  map)  up  to  Minneapolis — local  rates — But  we  ask  in  reply, 
why  this  reason  does  not  apply  to  Portland  business  as  well  as  to 
San  Francisco  business?  I  do  not  know  that  they  make  much  use 
of  that  line,  but  it  is  open  to  their  use  and  they  maintain  equality 
of  rates." 

I  have  already  explained  to  you  that  the  Portland  line  is  not  open 
to  us  and  we  do  not  take  business  into  Portland.  Further,  Mr.  Stubbs 
says : 

"The  Canadian  Pacific  line  does  use  the  Northern  Pacific  con- 
nection for  Portland  business,  and  does  work  upon  an  equality 
of  rate  with  all  the  North  Pacific  Coast  lines  for  Portland  business. 
Whether  it  does  or  not,  is  of  little  moment.  It  is  upon  an  exact 
equality  with  these  lines  south  of  Portland.  Then  why  should  it 
not  work  with  them  upon  an  exact  equality  as  to  rate  for  San 
Francisco  business?'' 


I  just  mention  this  in  order  to  set  the  record  right,  that  the  question 
of  Portland  business  is  in  the  record  and  consequently  it  was  quite  proper 
for  me  to  speak  on  the  subject. 

I  desire  to  revert  to  the  case  of  the  Hong  Kong  agreement.  That 
is  a  point  pretty  well  covered,  but  the  point  is  this:  The  agreement  was 
made  in  Hong  Kong  as  Mr.  Stubbs  correctly  states,  by  the  representa- 
tives of  the  steamship  lines,  but  in  making  that  agreement,  being  7,000 
or  8,000  miles  away,  those  representatives  were  empowered  to  act  in 
joint  traffic  matters  for  the  railway  companies  that  operated  in  connec- 
tion with  the  steamship  lines.  So  that,  in  maKing  the  agreement  covering 
overland  business  through  from  China  and  Japan  ports  to  points  in  the 
United  States  or  Canada,  they  were  acting  for  the  Southern  Pacific  Com- 
pany, the  Northern  Pacific  Company,  the  Great  Northern  and  the  Cana- 
dian Pacific  Company,  just  the  same  as  if  the  chief  traffic  officers  of  those 
companies  were  over  there  and  made  the  agreement.  So  there  is  no 
question  on  that  head  of  those  men  making  an  agreement  simply  for  the 
steamship  company;  they  also  made  it  for  the  railroad  company. 

A  great  deal  of  stress  has  been  laid  on  the  alleged  fact  that  the  dif- 
ferential arrangements  as  originally  made  and  continued  with  the  Cana- 
dian Pacific  were  the  outcome  of  fear  on  the  part  of  the  strong  American 
lines;  fear  that  we  would  adopt  a  "shot-gun  policy"  unless  they  delivered 
up  their  goods.  Now,  gentlemen,  I  hold  that  the  very  fact  of  your  being 
there  at  the  head  of  that  table  and  Mr.  Stubbs  and  myself  presenting  our 
respective  cases  to  you,  refutes  that  argument.  We  never  adopted  a  policy 
of  force.  We  did  adopt  as  everybody  adopts  the  proper  and  reason- 
able policy  of  negotiations,  business  negotiations.  In  agreeing  to  this 
arbitration,  what  is  our  position?  We  have  everything  to  lose  and  the 
other  man  has  everything  to  gain  if  we  do  not  substantiate  the  facts 
on  our  side  and  obtain  your  favorable  verdict.  If  we  were  pursuing  a 
"shot-gun  policy"  would  we  have  come  to  an  arbitration?  Would  we 
have  ever  consented  to  an  arbitration?  Would  we  not  have  said:  "No, 
we  will  not  arbitrate;  we  will  fight.  We  insist  on  taking  our  differentials 
and  you  can  do  what  you  like  about  it."  We  did  not  say  that.  But 
we  were  so  strong,  we  felt  so  strong  in  the  righteousness  of  our  cause,  in 
the  merits  of  our  case,  that  when  the  suggestion  of  arbitration  was  made 
we  said:  "Yes,  we  have  a  good  case  and  we  are  very  confident  we  will 
win.'"  We  were  taking  all  the  risk.  They  were  not  taking  any.  We  are 
in  the  position  today  that  we  have  been  in  for  ten  years  with  differentials. 
We  could  probably  keep  on  in  that  position  indefinitely  if  we  were  to 
pursue  this  policy  of  force,  this  robber  baron  policy  like  Mr.  Stubbs  has 
referred  to.  We  did  not  do  it.  We  are  here  with  all  the  risk  on  our  side 
and  none  on  theirs  to  present  what  we  believe  to  be  a  righteous  and 
just  cause.  There  is  no  "shot-gun  policy"  in  that.  Then  again, 
after  we  had  agreed  to  this  arbitration  the  door  was  open  for  us  to  with- 

12 


1 78 

«lraw.  The  Union  Pacific,  one  of  the  chief  and  leading  Trans-Continen- 
tal California  lines  by  their  chief  traffic  officer  in  meeting  assembled  at 
Denver,  voted  "aye"  to  this  resolution  to  arbitrate,  that  we  would  all 
arbitrate.  That  vote  was  reversed  by  his  President  and  the  Union  Pacific 
retired.  The  door  was  made  wide  open  for  us  to  withdraw  then.  We 
had  agreed  to  arbitrate  with  all  those  gentlemen.  That  is  the  "unit" 
Mr.  Stubbs  tells  us  about  which  immediately  became  a  dis-unit — disunited 
very  quick.  We  did  not  do  it  and  yet  we  are  accused  of  pursuing  a  policy 
of  force. 

Mr.  Stubbs  presents  for  your  consideration  the  remarks  made  by 
various  gentlemen  at  various  times  in  various  meetings  of  the  Trans- 
Continental  Association,  touching  on  the  question  of  the  Canadian  Pacific 
differentials,  wherein  they  all  give  expression  to  their  dissatisfaction. 
That  is  only  a  nagging,  harrying,  policy.  They  kept  that  up  for  ten  years 
in  and  out;  wanted  to  make  a  record.  We  all  know  about  the  records. 
We  have  all  been  railroading  for  a  good  many  years  and  we  all  know 
about  records  and  how  they  are  made.  No  importance  can  be  attached  to 
that.  We  know  that  loose  statements  are  often  made  at  these  meetings 
That  does  not  carry  any  weight. 

The  representative  of  the  American  lines  has  read  and  filed  with 
the  Board  a  number  of  communications  from  various  Boards  of  Trade 
in  California.  Usually  reports  of  such  important  bodies  as  Boards  of 
Trade  are  the  outcome  of  their  wisdom  in  general  meeting  assembled. 
Sometimes  they  are  reliable,  sometimes  they  are  not.  We  all  know  how 
Boards  of  Trade  can  be  assembled  at  times  and  under  certain  conditions 
and  we  know  how  resolutions  can  be  put  through  those  bodies.  Now  in 
regard  to  this  particular  report  drawn  up  by  Captain  Merry,  I  do  not 
know  whether  this  is  the  same  gentleman  or  not,  and  if  it  is,  I  do  not 
know  whether  he  went  into  that  matter  honestly  or  not,  but  I  have  a  very 
distinct  recollection  that  years  ago,  at  the  inception  of  this  line  there  were 
some  very  long  communications — voluminous  correspondence  as  between 
a  gentleman  named  Merry,  living  in  San  Francisco,  and  our  President, 
seeking  a  connection  with  the  road,  wanting  to  be  a  representative  in 
some  character.  He  did  not  get  what  he  wanted  and  I  presume  he  has 
not  been  very  friendly  to  this  railroad  since.  He  may  not  be  the  same 
gentleman,  but  I  have  an  impression  he  is.  If  I  am  right  in  my  surmise, 
it  is  not  difficult  for  a  man  to  work  up  resolutions  of  that  kind  through  a 
Board  of  Trade  or  any  other  body  if  he  sets  about  it. 

And  now,  gentlemen,  we  come  to  that  point  where  yesterday  we  were 
given  such  a  delightful  display  of  fire-works — oratorical  fire-works,  with 
all  the  fixings  thrown  in.  Mr.  Stubbs  made  a  grand  speech,  but  it  was 
not  business.  He  is  good  enough  to  say  that  I  have  made  out  a  case,  but 
that  I  have  not  made  out  this  case. 

Now  it  seems  to  me  that  all  these  national  prejudices  should  never 


179 

abide  in  the  mind  of  a  business  man.  It  seems  to  me  that  no  proper 
thinking  man  will  bring  up  such  questions,  or  touch  any  man  upon  his 
nationality  in  a  gross  manner.  The  flag  of  England,  according  to  Mr. 
Stubbs,  is  the  emblem  of  trade,  and  that  only.  The  flag  of  England  is  the 
emblem  of  open  trade.  The  flag  of  England  is  the  emblem  of  liberty, 
just  as  much  as  the  flag  that  floats  over  our  heads  today,  and  they  two, 
together,  with  their  silken  folds  entwined,  represent  the  liberty  of  the 
world,  and  as  they  pass  with  the  drum  beat,  going  around  the  world, 
the  oppressor  must  cease  to  oppress  and  the  haughty  nations  must  bow 
their  heads.  I  give  place  to  no  man  in  admiration  of  that  flag — I  mean 
the  American  flag.  Why  should  I?  I  followed  it  through  many  bloody 
fields ;  I  carried  it  on  many,  and  why  should  I  give  place,  although  I  am 
said  to  be  a  stranger  within  your  gates,  an  alien,  a  foreign  intruder.  That 
is  the  point  I  gathered  from  the  remarks  of  Mr.  Stubbs,  for  I  am  part 
and  parcel  of  the  Canadian  Pacific  Company,  a  company  that  owns  a 
very,  very  large  mileage  in  the  United  States,  a  company  that  spends 
millions  in  trade  with  the  United  States;  a  company  that  employs  many 
Americans,  not  only  in  the  United  States  but  in  Canada,  in  all  grades  of 
the  service.  There  sits  (indicating  Mr.  Bosworth)  as  true  an  American 
citizen  as  any  man  in  this  room,  who  occupies  a  very  important  position, 
one  of  the  most  important  in  the  service  of  the  Canadian  Pacific.  Is 
he  an  alien?  I  have  spent  more  than  half  my  life  among  you;  yet,  I 
am  a  stranger  within  your  gates. 

The  alleged  prejudice  in  the  minds  of  railroad  officers,  agents,  and 
others,  against  the  claim  of  the  Canadian  Pacific  for  a  differential,  if 
it  exists,  is  the  result  of  clamor  in  the  public  press  and  of  misrepre- 
sentation by  selfish  rivals.  Nothing  is  or  was  more  popular,  or  a  surer 
way  to  unthinking  public  favor  than  to  raise  an  outcry  against  a  foreign 
road ;  but  such  practices  are  narrow  and  unwise  and  in  no  way  creditable 
to  the  otherwise  liberal  ideas  of  the  American  people,  a  large  section 
of  whom  do  not  consider  broad  trade  questions  within  the  narrow  limits 
of  International  boundary  lines,  but  consider  that  the  door  should  be 
kept  wide  open  for  all,  in  order  that  American  trade  may  expand  and 
grow,  in  like  manner  to  the  open-door  policy  pursued  by  your  Cana- 
dian friends,  who  invite  competition,  freely  admit  and  encourage  Ameri- 
can lines  to  participate  in  their  domestic  traffic,  throwing  no  restrictions 
around  American  roads  in  their  efforts  to  compete  for  business  between 
points  in  the  Dominion.  Agencies  of  leading  American  lines  are  estab- 
lished in  the  larger  Canadian  cities  which  strive  hard  with  the  Canadian 
Pacific  Railway  for  the  transportation  of  traffic  between  strictly  Cana- 
dian points.  For  example,  between  Quebec  and  Ontario  on  the  one  hand, 
and  the  Northwest  on  the  other.  Those  interchanges  cannot  be  carried 
on  without  the  co-operation  of  American  lines,  such  as  those  west  o-f 
Chicago  and  St.  Paul.  In  reply  it  is  asserted  that  no  differential  is  claimed 


i8o 

by  American  lines  doing  a  Canadian  business,  therefore  the  Canadian 
Pacific  Railway  should  be  glad  to  share  in  American  traffic  on  even 
terms.  But  the  assumption  first  described  is  not  correct;  when  the  lakes 
are  used  in  connection  with  American  lines  on  Canadian  traffic,  differ- 
entials are  invariably  used;  in  other  words,  whenever  a  broken  route, 
that  is  part  water  and  part  rail,  is  used  on  traffic  carried  either  between 
Canadian  points  or  between  American  points,  all  roads  engaging  in  the 
business  claim  and  apply  differentials,  and  the  universality  of  the  rule  not 
only  disposes  of  the  point  in  this  direction  sought  to  be  established  by 
American  lines,  but  clearly  establishes  the  contention  of  the  Canadian 
Pacific  Railway  in  the  case  under  consideration. 

Mr.  Chairman  and  Gentlemen,  I  feel  that  I  have  trespassed  upon  your 
patience  very  largely,  and  I  know  that  you  will  be  glad  to  hear  that  I 
have  now  finished,  and  in  finishing  I  thank  you  most  heartily  for  the  very 
patient  and  kind  consideration  and  hearing  you  have  given  me  in  this 
case.  I  thank  you. 

ARBITRATOR  DAY— Mr.  Kerr,  I  ought  to  have  asked  you  a  ques- 
tion earlier  in  the  hearing  when  you  were  discussing  it,  but  it  seemed 
that  it  embarrassed  you  for  me  to  ask  questions,  but  this  is  one  of  the 
facts  that  I  would  like  to  know :  I  would  like  to  know  how  you  carry  your 
Trans-Continental  traffic,  that  is  to  say,  the  traffic  that  reaches  the  Mis- 
souri River  common  points  from  New  York  to  the  Pacific;  how  you  get 
that  to  your  rails  from  New  York  City,  chiefly? 

MR.  KERR— We  bring  it  to  Prescott  by  the  rail  line,  New  York 
Central  and  Rome  &  Watertown  roads. 

ARBITRATOR  DAY— To  Ogdensburg? 

MR.  KERR— Yes. 

ARBITRATOR  DAY— Is  there  a  ferry  there? 

MR.  KERR— Yes. 

ARBITRATOR  DAY— And  you  ferry  the  cars  right  over  to  your 
road? 

MR.  KERR— Yes. 

MR.  STUBBS — Now,  Mr.  Chairman,  I  wish  to  say  that  in  the  reply 
of  the  Canadian  Pacific,  there  have  been  some  issues  as  to  facts  between 
their  side  and  ours.  I  do  not  know  how  you  are  going  to  determine 
those  questions,  unless  you  take  testimony.  For  example,  notwithstand- 
ing the  answer  of  the  American  lines,  to  the  effect  that  there  is  no  trade 
with  respect  to  North  Pacific  Coast  business,  between  the  American 
North  Pacific  lines,  and  the  California  lines,  the  Canadian  Pacific  advocate 
reiterates  his  statement.  Now,  I  must  insist,  under  the  submission  of 
the  case,  that  his  iteration  and  reiteration,  of  that  statement  cannot  stand. 
In  order  to  have  any  influence  with  this  Board  against  our  denial,  he  must 
prove  it.  If  you  are  going  to  consider  that  matter,  we  demand  that  you 
shall  take  testimony  on  that  point. 


ARBITRATOR  WASHBURN— I  do  not  quite  catch  the  point  that 
you  refer  to. 

MR.  STUBBS— The  Canadian  Pacific  averred  the  reason  why  the 
Great  Northern  and  the  Northern  Pacific,  and  the  Oregon  Railroad  & 
Navigation  Company  did  not  participate  in  San  Francisco  traffic;  did  not 
insist  upon  the  use  of  their  rail-and-ocean  line  on  a  differential  basis  was 
that  there  was  a  trade. 

ARBITRATOR  WASHBURN— I  understand  now,  what  you  mean. 
I  understand  what  you  refer  to. 

MR.  STUBBS — I  answered  that  by  saying  there  was  no  trade.  Not- 
withstanding that  fact,  the  Canadian  Pacific  or  Canadian  line,  today 
reiterates  the  statement  that  there  is  a  trade.  He  has  no  foundation 
whatsoever  for  it,  except  the  fact  that  they  carry  but  little  business.  He 
introduces  evidence  in  the  shape  of — 

ARBITRATOR  WASHBURN— He  said  he  thought  he  knew. 

MR.  STUBBS— He  said  that  he  knew.  That  is  an  opinion.  That 
is  not  evidence.  The  point  I  wish  to  make  is  this,  that  he  must  prove 
his  statement;  that  it  cannot  stand;  is  entitled  to  no  consideration  by 
this  Board,  in  the  face  of  our  denial.  For,  when  we  deny,  we  speak 
the  truth  in  regard  to  the  matter.  We  demand  that  he  shall  be  put  to 
the  test  on  that  point,  or  that  the  statement  shall  be  thrown  out.  The 
Board  should  request  or  demand  that  witnesses  who  ought  to  know  all 
about  this  thing,  shall  come  before  it  and  testify,  under  oath,  if  you  please, 
to  the  fact  as  to  whether  there  is  any  such  trade  or  not. 

I  wish  further  to  make  the  point,  that  you  may  search  the  statement 
of  the  American  lines  through;  you  may  analyze  every  phrase,  dissect 
every  sentence  and  define  every  word,  and  you  will  not  find  one  per- 
sonal expression  in  it.  So  far  as  the  personal  representatives  of  the 
Canadian  Pacific  here,  and  wherever  they  have  represented  that  Com- 
pany, are  concerned,  they  have  always  been  received  and  treated  with  the 
utmost  courtesy  and  they  have  personally  received  such  treatment  as  to 
make  it  surely  beyond  question  that,  as  men,  they  were  esteemed  and 
respected,  placed  upon  an  equality  with  the  oldest  and  the  most  ex- 
perienced and  the  best  men  among  us.  When  the  American  lines  speak 
in  their  argument  of  an  "alien;"  when  they  speak  of  themselves  as  "citi- 
zens," they  are  referring  to  the  artificial  person  of  the  Canadian  Pacific 
road,  the  Canadian  Pacific  Railway  Company,  and  the  artificial  person  in 
law,  just  as  when  they  refer  to  themselves  as  "citizens,"  they  refer  to  the 
corporations  which  they  represent,  as  officers,  as  artificial  persons — "citi- 
zens of  the  United  States." 

There  is  no  occasion  for  any  dramatic  effort  on  the  part  of  the  repre- 
sentative of  the  Canadian  line  to  win  sympathy  or  to  point  his  argu- 
ment, by  saying  that  the  Traffic  Manager  of  that  road  is  an  American 
citizen,  that  he,  himself  has  fought  under  the  "stars  and  stripes."  There 


182 

is  no  one  who  will  honor  him  more  as  an  ex-soldier  of  the  United  States, 
whichever  side  he  fought  on  in  the  Civil  War,  than  the  representatives, 
the  individual  officers  of  the  American  lines.  All  honor  to  the  soldiers 
of  our  country,  whether  they  be  in  the  employ  of  an  alien  or  whether 
they  be  in  the  employ  of  a  citizen. 

It  is  not  fair  to  bring  personalities  into  this  controversy  and  we  wish 
to  disavow  the  idea  that  we,  in  our  individual  personalities,  in  our  per- 
sonal characters,  in  our  services  in  the  past  to  the  public,  or  to  the  Na- 
tion or  Dominion  under  whose  flag  we  live  today,  have  anything  what- 
ever to  do  with  this  case.  We  are  here,  not  as  Air.  Robert  Kerr  and  Mr. 
Bosworth  and  Mr.  Stubbs.  We  are  here  as  the  Canadian  line,  our 
identity  merged  with  that  corporation.  We  are  here  as  the  American 
lines,  the  corporations  that  were  named  to  the  Board  in  the  opening  made 
by  their  representative.  Our  identity  is  merged  with  theirs. 

ARBITRATOR  WASHBURN— Mr.  Stubbs,  of  course  I  suppose 
vou  understand  without  its  being  stated,  that  on  Monday  after  Mr. 
Shaughnessy  has  said  what  he  has  to  say,  you  will  have  an  opportunity 
to  reply  to  him  as  in  the  first  instance. 

MR.  STUBBS — I  do  not  understand,  I  wanted  to  understand  it,  that 
is  why  I  spoke  this  morning. 

ARBITRATOR  MIDGLEY— Oh,  certainly;  if  they  bring  in  any 
one  else  you  should  certainly  have  an  opportunity  to  be  heard  again. 

MR.  STUBBS — It  is  all  right;  I  guess  we  can  stand  it  if  the  Board 
can. 

ARBITRATOR  WASHBURN— Have  the  parties  to  the  hearing 
anything  further  to  say  this  afternoon? 

MR.  KERR — Mr.  Chairman,  just  one  word  more.  If  the  Board 
desires  any  fuller  information  than  they  have  with  regard  to  the  New 
York  and  Milwaukee  meetings  held  in  March  and  April,  1896,  Mr.  Sec- 
retary Countiss  has  one  copy  of  the  proceedings,  the  record,  the  ex- 
tended notes  of  the  discussions  had,  and  it  might  possibly  be  of  advan- 
tage to  you  to  ask  him  for  it. 

ARBITRATOR  WASHBURN— If  we  find  we  want  that  we 
will  call  upon  him  for  it;  of  course  with  the  understanding  that  we  will 
return  it. 

MR.  STUBBS — May  I  ask  whether  there  can  be  any  light  thrown 
upon  the  question  as  to  the  likelihood  of  our  being  able  to  get  away 
Monday  night? 

MR.  KERR— Oh,  I  imagine  so. 

MR.  STUBBS — I  did  not  know  but  you  knew  something  about  what 
Mr.  Shaughnessy  might  have  to  say  and  whether  it  was  going  to  throw 
the  thing  wide  open  again  for  discussion. 

MR.  BOSWORTH— Oh,  no;  I  think  he  will  not  occupy  more  than 
an  hour. 


MR.  STUBBS — You  know  bringing  in  reserves  is  a  little  danger- 
ous; I  may  want  to  come  in  with  some  reinforcements. 

ARBITRATOR  WASHBURN— The  American  lines  will  be  given 
any  reasonable  time  that  they  may  require. 

MR.  STUBBS — Any  one  of  the  American  lines  that  we  choose  to 
bring  forward  to  represent  us,  barring  counsel — any  one  of  the  Ameri- 
can lines  to  represent  us? 

ARBITRATOR  WASHBURX— Yes  sir.  Then  we  will  stand  ad- 
journed until  Monday  morning  at  1 1  o'clock. 


Morning  Session,  October  17,  1898,  n  A.  M. 
The  meeting  convened  pursuant  to  adjournment. 

ARBITRATOR  WASHBURN— Gentlemen,  on  Saturday  we  ad- 
journed until  this  hour,  to  give  Vice-President  Shaughnessy,  of  the  Cana- 
dian Pacific,  an  opportunity  to  appear  before  the  Board,  and  make  an 
argument,  and  if  he  is  now  prepared  to  speak,  we  will  listen  to  him. 

MR.  SHAUGHNESSY— Mr.  Chairman  and  Gentlemen  of  the  Board 
of  Arbitration:  I  thought  it  was  quite  distinctly  understood,  in  the  be- 
ginning, when  this  arbitration  was  decided  upon,  that  the  questions  to 
be  discussed  before  the  Board  of  Arbitration  were  strictly  of  a  business 
nature,  involving  arguments  and  exhibits  necessarily  technical  in  their 
character,  and  we  thought  it  best  that  our  Company,  at  any  rate, — and 
we  quite  understood  that  the  other  companies  intended  to  adopt  the  same 
course, — should  be  represented  by  our  traffic  officers; — our  chief  traffic 
officers,  who  deal  with  these  subjects  day  by  day  and  who  have  all  the 
necessary  information  at  their  ringer  ends.  I  was  surprised  to  learn  by 
telegraph  Friday  evening,  that  the  American  lines,  represented  by  Mr. 
Stubbs,  had  made  a  new  departure, — had  introduced  national  issues,  and 
had  endeavored  to  make  this  subject  one  of  national  importance,  and, 
indeed,  had  rather  appealed  to  the  national  and  patriotic  sentiments  of 
the  Arbitrators  than  to  their  sense  of  right  and  justice;  and,  inasmuch 
as  I  was  unable  to  learn  just  what  Mr.  Stubbs  had  said,  I  decided  I 
would  come  here  today,  having  learned  first  that  I  would  be  given  oppor- 
tunity to  speak,  for  which  I  thank  you.  I  decided  that  I  would  come  here 
today  to  make  such  answer  as  the  circumstances  of  the  case  might  de- 


1 84 

mand.  I  had  no  intention  then,  nor  have  I  any  intention  now,  of  introduc- 
ing any  new  issues  here,  or  saying  anything  that  may  tend  to  prolong  your 
session.  I  merely  desire  in  as  few  words  as  possible  to  answer  the  par- 
ticular remarks  of  Mr.  Stubbs,  with  reference  to  the  Canadian  Pacific, 
its  history,  its  destiny,  its  conduct,  and  so  forth.  I  had  no  opportunity, 
until  I  saw  the  stenographers'  notes  yesterday,  to  ascertain  just  what 
Mr.  Stubbs  had  said,  and,  indeed,  in  the  limited  time  I  had  after  I  re- 
ceived the  notes,  I  could  give  his  remarks  but  little  more  than  a  cursory 
examination.  I  must,  before  I  proceed,  express  my  regret  and  my  surprise, 
that  Mr.  Stubbs,  with  all  his  tact  and  his  policy,  and  his  experience, 
should  have  thought  proper,  when  a  business  question  of  this  kind  was 
before  the  Board  of  Arbitration  for  discussion,  to  display  what  I  must 
be  pardoned  for  calling  exceedingly  bad  taste  for  making  the  attack — 
an  unwarranted,  unreasonable  attack  upon  the  other  party  to  the  discus- 
sion. I  can  only  account  for  it  upon  one  ground  and  that  is  that  these 
gentlemen,  having  canvassed  the  situation,  having  brought  to  bear  every 
possible  argument  that  they  could  from  a  business  standpoint,  felt  so  un- 
certain as  to  the  outcome — or  rather  felt  so  certain  as  to  the  outcome — 
knowing  that  they  had  no  case, — that  they  decided  to  appeal  to  your 
sympathies.  But,  I  have  not  the  slightest  doubt  that  long  before  this 
the  Arbitrators  have  decided  that  it  would  be  quite  improper  in  dealing 
with  this  question  to  give  any  attention  whatever  to  such  appeals.  I 
may  say,  further  with  reference  to  these  appeals  that  they  are  not  un- 
usual; that  the  same  gentlemen  whose  sentiments  Mr.  Stubbs  voiced 
here  the  other  day  have  for  years  past,  by  every  possible  trick  and 
stratagem;  by  the  employment  of  counsel;  by  the  subsidizing  of  the 
press,  and  in  every  other  manner  endeavored  to  impress  those  views  upon 
the  people  of  the  United  States,  but  entirely  without  avail.  The  sections 
of  the  country  of  the  United  States  served  by  Canadian  avenues,  by  Cana- 
dian railways,  are  too  large  and  too  important  to  permit  of  any  inter- 
ference with  existing  conditions,  and  day  by  day  as  the  discussion  goes  on 
the  feeling  in  the  United  States,  I  am  satisfied,  against  anything  like 
interference,  becomes  more  pronounced. 

The  Canadian  Pacific  Railway  Company,  organized  under  the  laws 
of  Canada  has  about  7,000  miles  of  railway  in  Canada.  Its  paramount 
duty  and  its  prime  purpose,  as  Mr.  Stubbs  stated  in  his  remarks,  are  the 
development  of  the  resources  of  Canada,  the  expansion  of  Canada's  trade, 
and  the  Canadian  Pacific  has  endeavored  and  is  endeavoring  to  perform 
that  duty  faithfully,  and  in  pursuing  that  policy,  in  establishing  new  con- 
nections, in  creating  new  routes,  the  Canadian  Pacific,  like  a  progressive 
institution  as  it  is,  anxious  to  increase  its  earnings  year  by  year,  has  made 
investments  in  the  United  States  representing  upwards  of  $60,000,000.00, 
by  means  of  which  it  has  secured  close  working  arrangements  with  nearly 
2,000  miles  of  railway  in  the  United  States,  so  that  even  in  this  country, 


Mr.  Chairman,  no  gentleman  is  warranted  in  calling  the  Canadian  Pacific 
an  alien  institution.  It  is  true  that  the  Canadian  Pacific  received  sub- 
sidies from  the  Canadian  Government  for  the  construction  of  its  .line. 
Subsidies  in  the  way  of  cash,  lands  and  some  miles  of  completed  railway, 
because,  without  this  aid,  it  would  have  been  quite  impossible  for  the 
Canadian  Pacific  to  have  built  its  line  from  ocean  to  ocean,  and  the  vast 
areas  of  land  belonging  to  the  Dominion  Government,  which  are  now 
producing  food  for  the  people  of  the  world,  would  have  remained  un- 
productive. But  the  policy  of  the  Canadian  Government  in  this  respect, 
does  not  differ  materially  in  dealing  with  the  pioneer  portions  of  the 
west.  In  this  respect  the  United  States  was  quite  as  liberal,  and  I  think 
I  may  safely  assert  that  the  figures  will  show  that  the  lines  represented 
here  today  received  far  more  liberal  aid  from  this  Government  than  the 
Canadian  Pacific  received  from  the  Dominion  Government. 

Mr.  Stubbs  has  mentioned  another  matter.  Mr.  Chairman,  I  am 
going  into  these  matters  only  in  answer  to  Mr.  Stubbs.  I  do  not  con- 
sider them  essential  arguments  in  dealing  with  this  subject — I  am  only 
going  into  these  questions  because  the  issue  was  forced  upon  us.  There 
is  another  little  matter  about  which  Mr.  Stubbs  made  no  reference.  The 
Railways  of  Canada  representing  a  length  of  about  18,000  miles,  and 
serving  a  population  of  about  5,000,000  or  5,500,000  of  people — I  speak 
of  the  length  of  miles  of  road  in  1897, — received  in  that  year  tor  the 
carriage  of  mails  the  sum  of  about  $1,350,000.00.  The  Railways  of  the 
State  of  Ohio,  during  the  same  year,  received  for  the  same  services, 
$4,350,000.00;  the  State  of  Ohio  having  11,000  as  against  18,000  miles  of 
railroad,  and  the  population  of  the  State  being  somewhat  less  than  4,000,- 
ooo;  so  that  the  Railways  of  Ohio  received  for  the  carriage  of  the  mails 
nearly  three  and  one-third  times  as  much  money  in  the  year  1897,  as 
did  all  of  the  Canadian  railways;  and  we  find  that  in  the  little  State  of 
Nebraska,  the  railways  received  during  that  same  year,  for  the  carriage 
of  the  mails,  more  than  all  the  railways  of  Canada  received,  for  serv- 
ing that  vast  country,  and  that  population  of  5,000,000.  Another  sec- 
tion of  country,  where  the  Government  in  paying  these  mail  subsidies 
was  also  very  liberal, — I  refer  now  more  directly  to  some  of  the  territory 
traversed  by  the  lines  represented  here; — the  railroads  in  Texas,  Arizona, 
New  Mexico  and  California  with  a  population  nearly  equal  to  that  of 
Canada,  received  about  $4,200,000.00,  for  that  service,  about  three  and  a 
half  times  as  much  as  the  Canadian  Pacific  and  all  other  railways  in 
Canada  combined  received  for  the  same  service  in  that  time. 

I  say,  Mr.  Chairman,  I  am  not  mentioning  this  matter  for  the 
purpose  of  impressing  on  the  people  of  the  United  States  that  their  rail- 
ways are  being  overpaid;  on  the  contrary,  I  do  not  believe  that  they  are 
being  overpaid,  but  that  we  are  seriously  underpaid.  At  the  same  time  I 
desire  to  impress  on  you  the  fact  that  there  are  subsidies  and  subsidies, 


i86 

and  of  a  necessity  subsidies  are  not  always  paid  in  the  nature  of  a  lump 
sum. 

Then  when  they  refer  to  this  alien  corporation  that  is  preying  upon 
the  traffic  of  the  American  lines,  these  gentlemen  forget  some  other  ex- 
ceedingly important. factors.  I  venture  to  say  that  none  of  them  have 
mentioned  here  that  the  Northern  Pacific  Railway  Company  owns  250 
miles  of  railway  in  the  Province  of  Manitoba;  that  they  not  only  re- 
ceived from  the  Provincial  Government  and  the  British  Columbian  Gov- 
ernment the  necessary  franchises  to  enable  them  to  construct  this  rail- 
way, but  that  they  received  in  cash  every  dollar  of  the  amount  neces- 
sary to  construct  these  miles  of  railway.  Then  they  have  not  mentioned 
that  the  Great  Northern  have  received  in  addition  to  that,  large  grants 
of  land  from  the  Government  of  British  Columbia.  For  what  purpose 
have  those  lines  been  utilized?  For  the  purpose  of  competing  with  the 
Canadian  lines.  These  American  lines  are  preying  on  the  Canadian 
traffic,  and  surely  if  the  Canadian  lines  are  competing  for  the  American 
traffic  the  honors  are  quite  easy.  Neither  party  has  any  ground  for  com- 
plaint upon  that  score. 

There  is  another  difficulty  about  which  the  United  States  lines 
complain.  They  say  the  Canadian  Pacific  is  in  the  jurisdiction  of  the 
Canadian  Government;  it  is  not  amenable  to  our  Inter-state  Commerce 
Act;  it  is  not  required  as  the  United  States  lines  are,  to  obey  the  re- 
quirements of  that  Inter-state  Commerce  Act.  On  this  point  we  desire 
to  take  direct  issue  with  them.  The  American  lines  in  the  United  States 
will  naturally,  and  as  a  matter  of  fact  do,  take  liberties  with  their  lines  at 
home  that  the  Canadian  Pacific  would  not  think  of  doing  abroad  in  a 
foreign  country.  I  feel  confident  that  if  upon  this  point  the  opinion  of 
the  Inter-state  Commerce  Commission  were  asked,  and  that  those  Com- 
missioners told  you  the  candid  fact,  they  would  say  that  every  line  in  this 
country,  every  United  States  line  has  from  time  to  time  been  guilty  of 
infraction  of  that  Act.  Indeed,  I  might  tell  you,  and  I  think  1  could  tell 
you  without  danger  of  contradiction  that  today  every  line  represented 
here,  except  the  Canadian  Pacific  line  has  violated  the  Inter-state  Com- 
merce Act;  and  that  the  Inter-state  Commerce  Commission  would  state 
to  you  that  the  Canadian  Pacific  has  obeyed  its  requirements  more  closely 
than  any  other  line  on  the  continent. 

However,  gentlemen,  as  I  said  in  the  beginning,  you  have  no  doubt 
already  decided  that  all  of  this  discussion  upon  International  issues  is 
rather  beside  the  question,  and  I  do  not  intend  at  this  time  to  enlarge 
upon  it.  I  prefer  in  a  very  few  words  to  outline  the  position  of  the 
Canadian  Pacific  from  the  practical  standpoint,  and  for  that  purpose  and 
in  view  of  what  I  said  as  to  the  evenness  of  the  competition  between 
the  lines  on  the  one  side  or  the  other  I  should  not  discuss  the  practical 
question  before  you  obliterate  the  international  boundary  line.  Imagine 


187 

that  there  was  no  boundary  line  there  and  consider  that  all  these  railway 
companies  are  railway  companies  of  a  common  nationality,  all  within 
the  same  country.  Upon  no  other  ground  can  the  question  be  properly 
discussed.  There  are  the  Atchison,  Topeka  &  Santa  Fe,  the  Southern 
Pacific  and  Union  Pacific  and  other  lines  running  along  through  the 
United  States,  direct  all-rail  lines,  with  their  connections  to  San  Fran- 
cisco and  other  points  of  California.  There  is  the  Canadian  Pacific  line 
running  to  the  north,  with  its  Trans-Continental  line  and  its  connections, 
giving  it  access  to  all  of  the  New  England  States  and  indeed  most  of  the- 
States  of  the  east,  to  the  western  States  and  northwestern  States.  The 
Canadian  Pacific  has  no  rail  line  south  of  Vancouver.  It  has  no  line 
reaching  the  cities  of  the  Pacific  Coast  in  the  United  States,  and  as  a  con- 
sequence, for  the  purpose  of  conducting  its  business  between  Vancouver 
and  San  Francisco  it  uses  an  American  Steamship  line.  This  does  not 
belong  to  the  Canadian  Pacific;  it  is  not,  as  stated  in  the  Inter  Ocean 
of  this  morning,  subsidized  by  the  Canadian  Pacific  line  or  any  other  line. 
It  is  purely  a  steamship  line  engaged  in  commercial  trade  between  San 
Francisco  and  points  in  Canada  and  on  the  Coast. 

The  Inter-state  Commerce  Commission  in  their  opinion  or  report 
or  ruling  upon  the  passenger  rate  war  recently,  made  the  point  that  the 
Canadian  Pacific,  because  of  its  long,  circuitous  route,  should  not  be  a 
participant,  should  not  be  a  competitor  for  passenger  business  between 
New  York  and  other  points  on  the  Atlantic  Coast  and  San  Francisco; 
and,  while  I  do  not  consider  their  opinion  entirely  sound  upon  that  point, 
it  has  some  merit,  because  there  can  be  no  doubt  that  a  passenger,  re- 
quired to  travel  a  long  additional  distance,  several  hundred  miles,  to 
use  a  broken  route,  part  rail  and  part  water,  will  hesitate  about  going  that 
way,  unless  he  is  offered  some  extraordinary  inducements.  But  no 
similar  theory  can  obtain  in  connection  with  the  transportation  of  freight. 
It  does  not  matter,  in  the  slightest  degree,  to  a  carload  of  iron,  or  a  bale 
of  merchandise,  whether  it  be  carried  a  thousand  miles,  more  or  less.  It 
is  quite  impervious  to  sea-sickness  and  indigestion  and  is  not  incon- 
venienced by  trans-shipment  from  rail  to  boat  and  from  boat  to  rail.  The 
same  theory  cannot  obtain  to  the  transportation  of  merchandise,  but  the 
shipper,  or  the  owner  has  a  very  important  interest  in  the  question  of 
route.  If  he  can  send  his  carload  of  nails,  or  his  carload  of  merchandise, 
by  a  direct,  all-rail  route,  from  a  point  in  the  east  to  San  Francisco,  and 
from  San  Francisco  to  a  point  in  the  east,  with  the  same  saving  of  time, 
without  trans-shipment,  at  exactly  the  same  rate  he  is  required  to  pay 
if  he  sends  it  by  the  circuitous  route  with  the  delay  and  all  the  danger? 
of  trans-shipment  incident  thereto — dangers  of  damage,  and  so  forth,— 
it  is  natural,  indeed,  it  is  a  foregone  conclusion,  that  his  goods  will  go  by 
the  all-rail  route  and  the  less  direct  route  or  broken  rail-and-water  route 
will,  of  necessity,  be  forced  out  of  the  business.  In  order  to  compensate 


1 88 

tor  the  disadvantages  of  the  broken  route,  it  has  been  the  practice  for 
the  broken  route  to  offer  to  the  shipper  a  lower  rate  than  the  all-rail 
continuous  route;  and  the  giving  of  these  lower  rates,  unless  there  are 
some  regulations,  or  some  understanding,  is  sure  to  lead  to  demoraliza- 
tion. For  the  purpose  of  equalizing,  as  far  as  possible,  the  conditions, 
and  to  prevent  the  inferior  road  from  quoting  a  rate  that  may  be  unduly 
low,  and  to  keep  the  regulation  of  rates  within  some  reasonable  limit 
and  prevent  demoralization,  it  has  been  the  practice  for  years  and  years, 
on  this  continent,  to  grant  to  the  inferior  route  the  privilege  of  making  a 
lower  rate  than  the  stronger  route,  or  all-rail  route,  and  that  privilege  is 
known  in  railway  parlance  as  a  "differential."  Thev  have  been  accorded 
the  right  of  quoting  a  differential  rate.  At  the  present  time  the  Canadian 
Pacific  business  is  by  an  all-rail  line  to  Vancouver,  thence  a  steamship  line 
from  Vancouver  to  San  Francisco,  and  it  is  quoting  a  differential  rate. 
It  has  been  for  some  years  past,  by  agreement  with  its  competitors,  the  all- 
rail  lines,  and  we  maintain  that  agreement  is  in  force  today.  We  maintain 
that  the  dissolution  of  the  Trans-Continental  Association  has  had  no  effect 
whatever  upon  the  regulations  that  were  established  by  the  Trans-Con- 
tinental Association,  and  that  have  been  observed  in  the  past,  and  up  to 
the  present  time. 

Now,  the  gentlemen  representing  the  all-rail  lines  recently  con- 
ceived the  idea  that  with  this  differential,  the  Canadian  Pacific  had  pos- 
session of  an  undue  advantage  over  the  all-rail  lines.  A  meeting  was 
called  in  Denver  for  the  purpose  of  discussing  that  subject,  and  the  parties, 
unable  to  agree,  decided  to  refer  the  question  to  arbitration.  I  am  sure 
that  our  traffic  officials — Mr.  Bosworth  and  Mr.  Kerr — have  given  you 
all  the  necessary  evidence  to  show  that  at  even  rates  the  Canadian  Pacific 
would  be  forced  out  of  the  business,  and  that  the  freight  business  between 
San  Francisco  and  all  eastern  points  would  be  practically  in  the  control 
of  one  single  railway  company.  They  have  given  you  illustrations  to  show 
that,  under  like  circumstances,  it  is  the  common  practice,  indeed  the 
universal  practice,  in  the  United  States  to  permit  the  rail-and-water  car- 
rier to  quote  differential  rates,  the  Southern  Pacific  itself  being  no  ex- 
ception to  this  rule  because  by  some  of  its  routes  they  enjoy  such  a  dif- 
ferential. They  have  explained  that  the  Canadian  Pacific  with  no  access 
to  the  American  cities  on  Puget  Sound,  except  over  the  lines  of  active 
competitors,  have  no  territory  to  set  off  on  a  trade  with  the  San  Fran- 
cisco lines,  and  that  therefore  the  Canadian  Pacific  is,  with  reference  to 
San  Francisco,  in  a  position  radically  different  from  either  the  Northern 
Pacific  or  the  Great  Northern.  It  is  not  my  intention  to  recapitulate  or 
enlarge  upon  what  they  have  said;  but  I  shall  only  ask  you  to  consider 
this  matter  purely  from  the  standpoint  of  recognized  railway  practice  and 
precedent,  under  similar  conditions,  giving  no  heed  to  extraneous  state- 
ments or  sentimental  buncombe.  We  are  prepared  to  compete  with  the 


i89 

American  lines  for  inter-state  or  inter-provincial  traffic  in  exactly  the  same 
manner  as  they  compete  with  each  other,  the  establishment  and  regula- 
tions of  rates  to  be  determined  by  exactly  the  same  measures,  the  same 
practices  that  they  use  when  dealing  with  each  other  in  the  several  sec- 
tions of  the  country.  We  do  not  ask  that  our  foreign  position,  our  Cana- 
dian position,  give  us  any  advantage;  but  we  beg  you  that  it  shall  not 
prejudice  us  in  dealing  with  this  subject.  We  see  no  earthly  reason  why 
it  should  under  the  circumstances.  By  the  laws  of  the  country,  and  by 
common  consent,  we  are  exercising  in  the  United  States,  transit  privileges 
that  American  railways  enjoy  in  Canada,  and  while  that  continues  to  be 
the  case  we  shall  deal  with  those  very  railways,  and  shall  expect  them  to 
deal  with  us,  without  reference  to  the  question  of  nationality. 

Now,  gentlemen,  I  have  nothing  more  to  say.  With  this  I  am  pre- 
pared to  submit  to  you  the  case  of  the  Canadian  Pacific.  If,  in  your 
deliberations,  and  in  view  of  the  testimony  that  has  been  offered  here, 
you  find  that  the  present  differential  enjoyed  by  the  Canadian  Pacific  is 
insufficient,  I  have  no  doubt  that  you  will  increase  it.  It  is  the  duty  of 
the  Arbitrators  to  increase  it  if  the  circumstances  show  that  it  be  insuf- 
ficient. If  it  be  excessive,  it  will  be  the  duty  of  the  Arbitrators  to  decrease 
it.  I  can  see  no  possible  grounds,  and  I  hope  that  you  will  see  no 
grounds,  upon  which  that  differential  shall  be  abrogated.  Its  abrogation 
means  a  serious  thing  to  the  Canadian  Pacific.  It  means,  if  you  decide 
that  it  shall  be  abrogated,  that  the  Canadian  Pacific  shall  practically  with- 
draw from  San  Francisco  and  California  business,  and  that  it  shall  entirely 
avoid  that  territory,  because  it  can  secure  no  business  on  even  terms  with 
these  Trans-Continental  lines,  and  it  will  be  making  that  sacrifice;  you 
will  be  compelling  it  to  make  that  sacrifice  without  giving  it  one  single 
thing  in  the  way  of  return,  either  in  the  matter  of  territory  or  anything 
else.  So  that,  to  us,  to  the  Canadian  Pacific,  the  abrogation  of  that  differ- 
ential would  be  a  most  serious  matter  indeed.  I  thank  you,  gentlemen, 
for  having  listened  to  me. 

ARBITRATOR  DAY— Mr.  Shaughnessy,  what  is  the  capitalization 
of  the  Canadian  Pacific  road? 

MR.  SHAUGHNESSY— $65,000,000.00. 

ARBITRATOR  DAY— That  is  represented  in  shares:' 

MR.  SHAUGHNESSY— In  shares. 

ARBITRATOR  DAY— At  the  par  value  of  $100? 

MR.  SHAUGHNESSY— Yes  sir. 

ARBITRATOR  DAY— What  dividends  were  paid  last  year  on  the 
Canadian  Pacific  capitalization;  on  the  capital  stock? 

MR.  SHAUGHNESSY— 4  per  cent. 

ARBITRATOR  DAY— Mr.  Kerr,  I  would  like  to  ask  you  another 
question:  On  your  traffic  for  points  on  and  west  of  the  Missouri  River 


190 

from  Boston — I  mean  Inter-state  traffic  now  solely — how  does  the  traffic 
from  Boston  reach  your  rails? 

MR.  KERR — It  goes  up  and  connects  with  us  at  Newport,  Vt.,  all- 
rail,  over  the  Boston  &  Maine. 

ARBITRATOR  DAY — Do  you  have  any  water  connection  with  your 
rails  on  the  Atlantic  Seaboard? 

MR.  KERR — There  are  from  New  York,  in  connection  with  the 
Canadian  Pacific  Dispatch.  That  does  not  operate  Trans-Continental, 
but  operates  up  into  this  section  of  the  country,  Chicago  and  St.  Paul. 

ARBITRATOR  DAY— I  thank  you. 


ARBITRATOR  WASHBURN— The  Board  is  ready  to  listen  to  any 
reply  that  the  representative  of  the  American  lines  desires  to  make  to 
the  remarks  of  Mr.  Shaughnessy. 

MR.  STUBBS— Mr.  Chairman,  and  Gentlemen  of  the  Board:  I  do 
not  know  that  I  have  much  to  add ;  indeed,  I  am  somewhat  embarrassed 
by  the  turn  the  discussion  has  taken.  I  really  do  not  know  how  far  my 
right  extends  to  reply  to  Mr.  Shaughnessy.  If  I  err,  you  will  have  to  call 
me  to  order. 

FIRST,  the  Vice-President  of  the  Canadian  Pacific  says,  that  in  the 
matter  of  the  subsidy  granted  to  the  Canadian  Pacific  line,  or  referring  to 
that  matter,  that  some  of  the  American  lines  represented  in  this  contro- 
versy were  quite  as  well  dealt  with  by  the  United  States  Government.  It 
is  a  matter  of  public  knowledge  that  the  Canadian  Pacific  did  receive 
$35,000,000.00  in  cash — 

MR.  SHAUGHNESSY— $25,000,000.00. 

MR.  STUBBS— $35,000,000.00.  The  Canadian  Pacific  received  $25,- 
000,000.00  and  25,000,000  acres  of  land.  The  Canadian  Government  then 
took  back  7,000,000  acres  of  land  at  One  Dollar  and  fifty  cents  an  acre; 
which,  while  it  reduced  the  land  subsidy  of  25,000,000  acres  to  18,000,000 
acres,  it  increased  the  money  subsidy  $10,000,000.00.  You  will  find  that 
all  explained  fully  in  the  published  documents  which  I  filed  with  you. 
They  received  $35,000,000.00  in  cash  from  the  Canadian  Government, 
18,000,000  acres  of  land  and  714  miles  of  railroad.  That  is  acknowledged. 
None  of  the  American  lines  received  a  dollar  of  cash  subsidy  from  the 
United  States  Government.  The  Government  loaned  them  money,  and 
issued  bonds  and  paid  the  interest,  but  those  lines  have  got  to  repay.  Tne 
Union  Pacific  has  already,  in  its  settlement  with  the  Government,  paid 
the  debt  in  full.  Every  one  who  is  familiar  with  the  agitation  in  Congress 
now,  over  the  settlement  with  the  Central  Pacific,  which  is  far  more 
serious  than  the  Union  Pacific,  knows  that  the  Government  is  pressing 
and  will  press  for  the  refundment  or  re-payment  of  the  full  amount  ad- 


IQI 

'     i     i 

vanced,  principal  and  interest.  Their  land  subsidy — I  am  not  able  to 
tell  you  how  much  it  was,  in  gross;  it  was  every  odd  section  within 
twenty  miles  of  the  road.  What  that  aggregated,  I  do  not  know;  much  of 
it  has  been  forfeited. 

Now,  the  representative  of  the  Canadian  line  this  morning  says,  that 
the  Northern  Pacific  and  the  Great  Northern,  referring  to  both  of  them, 
have  extended  up  into  the  Province  of  Manitoba,  built  into  that  portion 
of  the  Canadian  territory,  for  the  purpose  of  sharing  in  Canadian  com- 
merce; that  commerce  which  is  purely  domestic  to  Canada.  No  one 
denies  that,  but  can  he  demonstrate  to  this  Board  that  they  entered  that 
territory  asking  an  advantage  over  the  Canadian  line?  I  endeavored  to 
impress  it  upon  the  minds  of  the  Board,  that  the  American  lines  did  not 
say  to  the  Canadian  line:  "Keep  out  of  this  territory."  In  fact,  when 
there  were  filed  with  you  the  petitions  from  the  Chambers  of  Commerce 
of  the  principal  cities  on  the  Pacific  Coast,  (and  I  did  not  file  all  that  were 
filed  with  Congress,  for  Portland,  I  know,  sent  in  a  like  petition,  and  I 
think  Seattle  and  Tacoma  did  the  same  thing), — I  explained  to  the  Board 
that  while  these  Chambers  of  Commerce  petitioned  the  United  States 
Congress  to  suspend  and  abrogate  the  bonding  privilege,  which  would 
effectually  cut  the  Canadian  line  off  from  competing  on  any  terms  with 
the  American  lines,  we  did  not  go  so  far;  I  explained  that  we  welcomed 
the  Canadian  line  in  this  territory,  if  it  came  here  upon  equal  terms 
with  us. 

Further  on,  the  Honorable  Vice-President  of  the  Canadian  line  says: 
''We  are  prepared  to  compete  exactly  as  they  compete  with  each  other," 
—meaning  the  American  lines.  That  is  all  we  want  him  to  do.  Now, 
competition  does  not  consist  alone  in  competition  of  rates.  There  is  such 
a  thing  as  competition  in  service;  competition  in  facility,  which  every 
railroad  man  and  every  shipper  understands.  The  Canadian  line  has  not 
competed,  never  has,  and  is  not  now  competing  in  service.  This  I  illus- 
trated to  the  Board,  by  contrast  with  the  "Sunset"  line,  that  it  was  evi- 
dent that  it  had  sat  down  on  its  differentials,  and  depended  wrholly  upon 
its  differentials,  in  order  to  get  business  with  San  Francisco,  instead  of 
doing  what  the  "Sunset"  line  had  done.  Now,  the  Vice-President  of  the 
Canadian  Pacific  says,  that  they  have  no  line  from  Vancouver  running 
into  San  Francisco  or  into  the  United  States  territory,  but  that  there  is 
an  American  Steamship  line  there  with  which  they  are  compelled  to 
work.  Now,  we  know  that  that  is  not  so.  Why  does  not  the  Canadian 
Pacific  line  go  into  this  territory  on  the  west  Coast?  What  is  to  hinder 
the  Canadian  line  from  building  into  San  Francisco?  Then  its  question 
of  disabilities  would  disappear.  If  American  lines  put  in  their  money 
to  build  a  railroad,  put  up  that  investment,  thereby  creating  an  advantage 
over  the  Canadian  line  who  has  the  same  field  open  to  it,  who  will  say 
that  they  must  necessarily  compensate  it  by  giving  an  advantage  in  rate? 


IQ2 

Why  should  not  the  Canadian  line  be  less  like  the  Chinaman  who  comes 
into  this  country,  bringing  nothing  with  him,  and  sending  every  dollar 
that  he  gets  out  of  the  country;  even  comes  under  a  contract  that  his 
bones  must  be  taken  back  to  the  Celestial  Kingdom?  That  is  what  the 
Canadian  line  does  with  respect  to  San  Francisco  business.  It  can  build 
railroads  into  the  United  States  territory  exactly  as  the  Great  Northern, 
or  acquire  railroads  exactly  as  the  Great  Northern  and  the  Northern 
Pacific  acquired  roads  in  Manitoba;  do  it,  exactly  as  the  American  lines 
have  done  it.  By  using  the  same  means,  the  same  methods,  the  same 
skill,  the  same  energy,  they  can  duplicate  the  lines  of  the  American  roads. 
There  is  no  question  about  that.  I  think  it  is  preposterous  for  any  line 
having  this  field  and  this  opportunity  open  to  it  to  come  into  the  United 
States  and  say,  "Because  we  elect  to  use  an  inferior  route  because  of 
the  money  that  it  brings  into  our  pockets,  the  profit  we  make  by  so  doing, 
and  do  use  a  steamer  line  from  Vancouver  to  San  Francisco,  that  the 
American  lines  shall  pay  us  something  in  addition  by  giving  us — (as  its 
own  representative  said) — a  money  advantage."  What  we  are  contend- 
ing against  is  the  claim  of  the  Canadian  Pacific  line,  an  alien — for  it  is  an 
alien — for  an  advantage  over  domestic  lines  with  respect  to  domestic 
business.  They  are  not  entitled  to  the  advantage. 

The  Vice-President  of  the  Canadian  Pacific  road  refers  to  a  fact  that 
1  fully  expected  the  General  Traffic  Manager  and  his  assistant  would  have 
referred  to  here,  viz.,  that  they  are  in  this  country  by  the  sufferance  of  the 
laws  of  this  country;  that  the  laws  of  this  country  admit  them  upon  an 
equality  with  the  American  lines.  He  did  not  use  the  word  "equality" 
but  said  that  they  have  the  same  privileges  in  this  country  under  the  laws 
that  the  American  lines  have.  What  he  refers  to  is  that  section  of  the 
United  States  statutes  which  gives  to  the  foreign  line,  or  gives  to  the 
shippers,  the  right  to  send  their  domestic  business  from  one  point  in  the 
United  States  to  another  point  in  the  United  States,  through  a  foreign 
country  without  t*ie  payment  of  duties  upon  re-entry  into  the  United 
States.  That  law  was  passed  by  Congress  for  what  purpose?  Was  it 
passed  in  order  to  give  the  Canadian  line  an  advantage  over  the  American 
lines?  No  sirs.  It  was  to  put  them  upon  an  equality,  and  that  is  all 
that  we  ask.  Suppose  it  had  been  said  to  Congress  at  the  time,  that  they 
are  foreign  lines;  that  they  are  circuitous  lines,  and  that  this  mere  sus- 
pension of  the  collection  of  duties,  as  is  proposed  will  not  enable  them 
to  do  any  business.  Do  you  suppose  Congress  would  have  added  a 
subsidy  or  any  additional  privilege  which  would  have  overcome  the  natu- 
ral disadvantage  they  labored  under?  Now,  moreover,  that  privilege  that 
was  given,  I  think  it  is  in  Section  3006  of  the  Statutes  of  the  United 
States,  was  given  not  for  the  purpose  of  benefiting  a  foreign  corporation. 
It  was  given  for  the  purpose  of  benefiting  the  domestic  shipper.  It  was 
reciprocal.  It  gave  to  the  Canadian  people  by  the  operation  of  their  laws 


the  right  to  ship  Canadian  commerce  through  the  United  States  back 
into  Canada  and  it  gave  the  American  shipper  the  right  to  ship  American 
freight  through  Canada  back  into  the  United  States.  It  was  because  it 
gave  a  short  line.  It  goes  away  back  to  1864.  The  Act  was  passed  for 
the  purpose  of  legalizing  the  ruling  of  the  Treasury  Department.  When 
the  Suspension  Bridge  was  built  a  shorter  route  could  be  made  to  the 
Peninsula  of  Michigan  and  the  Great  Northwest  through  Canada  than 
could  be  made  by  any  of  these  lines  (indicating  on  map)  and  the  privilege 
was  given  for  the  benefit  of  our  own  people.  Now  then,  when  the  Inter- 
state Commerce  law  was  passed — dealing  still  with  this  question  of 
equality — when  the  Inter-state  Commerce  law  was  passed — Section  6, 
I  think  it  is,  provides  that  tariffs  shall  be  published — certain  tariffs,  shall 
be  published  and  posted  and  that  all  through  tariffs  shall  be  filed  with  the 
Inter-state  Commerce  Commission.  It  was  found  that  the  Canadian  cor- 
porations were  not  subject  to  that  law.  They  therefore  could  evade  that 
law  if  they  chose  to  do  so,  so  that  in  order  that  they  might  not  have  an 
advantage  over  the  domestic  carriers — (Congress  exercised  itself  to  pre- 
vent there  being  any  advantage  over  the  domestic  carriers) — a  section, 
or  paragraph,  rather,  was  introduced  into  that  section  that  made  it  obliga- 
tory upon  the  Secretary  of  the  Treasury,  upon  demand  of  the  Inter-state 
Commerce  Commission,  to  suspend  the  bonding  privilege  in  any  case 
where  a  Canadian  corporation  or  a  foreign  corporation  failed  to  comply 
with  the  provision  of  our  own  laws.  That  shows  that  it  was  not  in  the 
mind  of  Congress  that  the  Canadian  line  should  have  any  advantage  over 
our  own.  It  is  the  spirit  of  our  laws,  equality,  and  we  want  that  spirit 
applied  to  this  business. 

Now,  it  is  intimated  that  it  seemed  necessary  to  bring  the  chief 
operating  officer  of  the  Canadian  Pacific  road  here  for  the  purpose  of 
answering  an  allusion  that  we  made  or  an  appeal  that  we  made  to  the 
patriotism  of  the  Board  of  Arbitrators.  That  section  of  our  argument 
was  introduced  by  the  fact  that  the  Canadian  line  had  opened  the  ques- 
tion. If  I  remember  rightly  the  advocate  of  the  Canadian  line  said 
something  to  this  effect — I  cannot  take  time  to  refer  to  the  record,  I 
will  only  attempt  to  give  the  substance  of  it — that  the  American  lines  had 
harried  the  Canadian  lines — that  they  had  agitated  and  sought  by  legis- 
lation through  Congress  and  by  every  way  that  was  within  their  power 
to  prejudice  the  Canadian  line  and  shut  them  out  of  this  territory.  It  was 
to  answer  that  suggestion  plainly  made  for  the  purpose  of  prejudicing  this 
Board  against  the  case  of  the  American  lines — it  could  have  no  other  pur- 
pose than  to  impress  you  gentlemen  with  the  idea  that  we  were  not  play- 
ing fair  in  this  matter;  that  we  had  been  the  strong  man  abusing  the 
poor  man.  I  then  appealed  to  this  Board  if  it  were  not  true,  if  it  was  not 
the  right  of  every  Englishman  as  well  as  for  every  American  to  agitate 
any  question  that  affected  his  personal  or  his  property  rights.  It  is  funda- 


194 

mental  in  the  principles  of  both  governments.  Every  American  citizen 
has  that  right,  and  every  Englishman  will  assail  Parliament  if  Parliament 
passes  a  law  which  is  inimical  to,  or  fails  to  enforce  a  law  which  is  pro- 
tective of  that  person's  rights — which  affects  his  property.  If  we  have 
done  what  we  were  charged  with,  we  only  exercised  the  inalienable  right 
of  American  citizens,  I  stated,  further,  that  this  thing  had  become  a 
public  question;  not  that  we  had  made  it  so;  that  it  had  become  a  na- 
tional question.  I  said  this  was  evidenced  by  the  fact  that  the  Inter-state 
Commerce  Commission  had  treated  of  this  question  in  its  several  Annual 
Reports  to  which  I  have  referred  the  Honorable  Board.  I  said  that  the 
Inter-state  Commerce  Commission  had  investigated  this  question  with 
respect  to  passenger  business,  and  had  made  a  report  and  rendered  an 
opinion  upon  it  in  which  notwithstanding  what  the  Honorable  Yice-Presi- 
dent  of  the  Canadian  Pacific  road  says  it  plainly  states — and  its  dictums 
are  full  of  it — that  the  Canadian  line  is  not  subject  to  the  laws  of  the 
United  States.  I  have  not  raised  the  question  here  as  to  whether  the 
Canadian  line  obeyed  those  lawrs.  That  is  apart  from  this  question  so  far 
as  this  differential  case  is  concerned.  I  do  not  care  whether  they  are 
quoting  a  reduction  of  TO  per  cent  or  25  per  cent  or  50  per  cent  below 
our  rates.  It  has  nothing  to  do  with  this  case,  but  it  is  a  public  question. 
It  is  a  national  question  and  I  stated  to  this  Board  that  it  would  continue 
to  be  so,  so  long  as  the  British  flag  floated  over  Canada  and  the  Canadian 
line,  and  the  American  flag  was  unfurled  above  the  American  lines;  so 
long  as  the  Canadian  line  is  an  alien  corporation  coming  into  this  coun- 
try and  demanding  what?  To  work  upon  an  equality  with  us?  No,  to 
work  with  an  advantage  over  us.  Now,  it  is  all  right  to  narrow  this  ques- 
tion down  to  business  principles.  We  want  it  to  be  considered  from  a 
business  standpoint,  but  when  you  take  considerations  of  business,  of  the 
conducting  and  extension  of  trade  away  from  any  province  or  dependency 
of  the  British  Government,  you  take  away  its  very  life  and  spirit.  Brother 
Kerr  referred  to  the  open  door  policy  of  England;  calls  this  evidence,  in- 
tends to  be  understood  that  we  should  extend  an  advantage  to  the  Cana- 
dian Pacific  in  order  that  we  may  be  in  harmony  with  the  open  door 
policy  of  Great  Britain.  There  was  a  little  speck  of  war  in  the  horizon  a 
little  while  ago.  What  was  it  about?  It  was  because  Russia  had  gained 
a  railway  franchise  in  China  instead  of  Great  Britain.  What  did  Great 
Britain  care  especially  about  that  railway  franchise,  per  se?  Nothing, 
but  it  was  because  if  that  railway  franchise  was  given  to  Russia  and  not 
given  to  an  Englishman,  the  territory  or  provinces  served  by  that  railroad 
would  be  closed  to  British  trade,  and  so  jealous  is  Great  Britain  of  her 
British  trade  that  she  threatened  to  go  to  war  with  Russia  rather  than 
that  thing  should  come  to  pass. 

Take   away  business  principles.     Rob  this  question  of  its  national 
aspect  by  saying  that  it  is  not  business.     Take  the  extension  of  British 


195 

trade  away  from  the  policy  of  the  British  Government,  and  her  fleet, 
which  is  built  for  no  other  purpose  than  to  maintain  that  trade,  and  which 
is  now  equal  to  the  combined  navies  of  the  world,  will  disappear  inside 
of  ten  years.  Take  business  principles,  as  shaping  and  governing  gov- 
ernmental policy,  away  from  Great  Britain  and  the  British  Empire  per- 
ishes from  the  face  of  the  earth.  Take  business  principles  away  from  the 
governmental  policy  of  the  United  States,  and  where  will  this  agitation 
end,  or  how  far  will  this  agitation  go  with  respect  to  whether  we  shall 
retain  the  Philippines  or  Cuba  or  Porto  Rico?  Is  not  the  business  senti- 
ment of  this  country  crying  out  to  the  Government  and  forcing  the  Gov- 
ernment to  a  policy  of  retention  of  the  Islands  in  the  Pacific  Ocean  as 
well  as  those  in  the  Caribbean  Sea?  How  can  you  rob  it — this  question 
— of  its  public  aspect?  Business  principles?  Great  Britain  was  against 
slavery,  fundamentally;  was  active  in  its  destruction  all  over  the  world, 
until  the  Civil  War  in  America  broke  out,  and  then  Great  Britain  sym- 
pathized with  and  aided  the  South.  Why?  Because  the  American  people 
controlled  the  commerce  of  the  oceans  at  that  time.  She  saw  her  chance 
and,  against  her  settled  principles,  she  equipped  the  Shenandoah  and  the 
Alabama,  and  allowed  them  to  sail  forth,  fully  equipped  and  armed,  to 
prey  upon  American  commerce,  and  she  destroyed  our  commerce  and 
took  it  to  herself  and  today  controls  it,  and  she  has  got  these  combined 
navies — this  enormous  navy — for  no  other  purpose  than  to  maintain  it. 
Now,  this  is  a  public  question;  it  is  a  national  question;  and  while  we 
who  are  called  the  Trans-Continental  lines — meaning  the  lines  west  of 
this  Missouri  River  line — take  upon  ourselves  the  burden  of  contesting 
this  question  with  the  Canadian  line,  all  these  lines  are  interested  in  it. 
(Pointing  to  the  map.) 

As  illustrated,  if,  by  the  use  of  a  differential  freight  is  taken  from 
New  York  out  over  the  Canadian  line,  that  traffic  is  diverted  from  the 
New  York  Central,  or  from  the  Pennsylvania  or  the  Baltimore  &  Ohio — 
from  all  these  direct  lines.  Nearly  all  the  important  railroads  in  the 
United  States  are  interested  in  this  question.  We  claim  that  under  the 
circumstances  the  Canadian  line  has  no  right  to  share  in  the  traffic  if  it 
cannot  share  in  that  traffic  upon  equal  terms  with  us.  The  question,  sim- 
mered down,  is,  "Shall  the  American  lines  adopt  a  policy  which  will 
force  a  part  of  this  traffic  on  the  Canadian  line?"  Prima  facie,  that  is  in 
restraint  of  trade.  Prima  facie,  that  is  an  inducement  to  the  Canadian 
line  not  to  improve  its  service;  not  to  build  lines  into  the  United  States 
and  take  its  place  where  we  are,  having  to  pay  taxes  as  we  do,  and  be 
subject  to  our  laws  as  we  are.  Right  on  its  face,  it  shows  that  that  is 
an  inducement  for  the  Canadian  line  to  occupy  the  same  relative  posi- 
tion to  this  traffic,  so  far  as  the  physical  operation  of  its  road  is  con- 
cerned, as  it  has  occupied  from  the  beginning;  and  that  must  neces- 
sarily be  in  restraint  of  trade,  for  the  public,  as  I  have  said,  is  deeply 


IQ6 

interested  in  having,  not  only  adequate  but  efficient  service,  and  I  do  not 
believe  that  it  is  possible  to  convince  a  business  man,  an  intelligent  man, 
who  thinks  upon  this  subject,  that  there  is  any  justification,  whatever,  in 
giving  the  Canadian  Pacific  a  money  advantage  over  the  American  lines 
because  it  elects  to  use  this  steamship  line,  (pointing  to  map)  when  it  can 
get  franchises  and  can  build  down  into  San  Francisco,  as  readily  as  any  of 
the  American  lines,  and  if  the  American  lines  have  built  these  roads  at 
great  expense  to  themselves,  they  ought  not  to  be  asked  to  pay  the  Cana- 
dian Pacific,  by  forcing  a  portion  of  the  traffic  on  that  line  for  using  an 
inferior  route.  It  seems  to  me  to  be  an  "A,  B,  C"  proposition. 

The  Vice-President  of  the  Canadian  Pacific,  referred  to  and  dwelt 
upon  the  fact  that  he,  or  his  representative,  had  shown  that  the  Canadian 
line  was  only  asking  for  what  was  recognized  as  a  settled  principle  over 
the  United  States,  both  with  respect  to  domestic  traffic  and  with  respect 
to  international  traffic.  Now,  I  think  I  have  shown  this  Board,  clearly, 
First:  that  the  customs  to  which  he  refers,  and  which  were  elaborately 
set  forth  by  his  representative  in  the  first  instance,  do  not  meet  this  case. 
Take  the  differentials  by  lake-and-rail  to  North  Pacific  Coast  points  that 
were  dwelt  upon  with  emphasis.  Those  differentials  apply  by  every  line 
that  reaches  the  North  Pacific  Coast.  Take  the  differentials,  lake-and- 
rail,  with  the  Atlantic  Seaboard;  or,  Atlantic  Seaboard,  ocean-and-rail, 
to  Texas;  or,  Atlantic  Seaboard,  ocean-and-rail,  to  Colorado.  Take  them 
all,  every  example  that  he  gave  you;  and  in  no  case  has  the  differential 
been  limited  to  one  line,  but  all  the  lines  which  were  similarly  circum- 
stanced in  each  territory  use  the  same  differential. 

Now,  the  Canadian  line  adheres  to  its  allegation  of  physical  dis- 
ability by  reason  of  being  a  broken  line,  as  its  chief  and  almost  its  only 
dependence  in  its  case  here.  The  "Sunset"  line  has  been  shown  to  you 
— and  I  take  it  as  the  extreme  case;  I  take  it  because  the  "Sunset"  line  is 
the  great  bug-bear  in  the  eyes  of  the  Canadian  line — has  been  shown  to 
you  to  be  physically,  in  respect  to  the  disabilities  described  by  the  Cana- 
dian line,  a  weaker  line  than  the  Canadian  line. 

In  the  first  place,  the  ocean  haul  from  Vancouver  to  San  Francisco, 
is  eight  hundred  and  some  odd  miles — I  have  forgotten — eight  hundred 
and  fifty  or  sixty  miles.  It  is  1800  miles  from  New  York  to  New  Or- 
leans,— more  than  double.  Compare  the  line,  New  York  to  San  Fran- 
cisco via  the  "Sunset,"  New  York  to  San  Francisco  via  the  Canadian  line 
and  Pacific  Coast  Steamship  Company,  and  it  is  200  miles  longer  this 
way.  (pointing  on  map  to  "Sunset"  line).  There  is  a  comparison.  Nar- 
row their  contention  down  to  that  physical  disability  and  there  you  have  a 
graphic  comparison;  a  picture  of  the  two  lines.  Now,  where  does  the 
Canadian  line  stand  under  that?  What  is  its  answer?  "Oh,  well,  the 
'Sunset'  line  has  been  operating  so  successfully  that  it  has  demonstrated 
its  ability  to  take  the  business,  and  it  has  got  all  it  should  have." 


197 

That  is  a  fine  argument,  isn't  it?  If  the  "Sunset"  line  can  build 
steamships,  improve  transfer  service,  run  trains  2400  or  2500  miles  from 
New  Orleans  to  San  Francisco,  and  take  a  fair  share  of  the  business;  so 
much  of  the  business  that  the  Canadian  line  and  no  other  line  would  be 
willing  to  give  it  any  more,  and  it  has  double  the  ocean  haul;  and  in 
total  length  of  haul  it  is  200  miles  longer  than  the  Canadian  line,  tell  me 
why  the  Canadian  line  cannot  do  it?  Mr.  Chairman,  I  know  that  you  could 
do  it,  and  while  I  am  not  an  operating  man,  if  I  were  on  the  Canadian 
line,  I  could  do  it.  All  I  should  ask  would  be  that  my  backers  should 
put  up  the  money,  as  they  did  in  the  case  of  the  "Sunset"  line.  But,  in- 
stead of  putting  up  its  money  to  make  its  line  effective  as  a  competitor 
with  the  "Sunset"  line,  the  Canadian  line  comes  in  and  says:  "Give  us 
a  money  advantage;"  that  would  be  a  tax  on  the  "Sunset"  line  after  it 
has  improved  its  service  in  that  way.  Or  it  says,  "Oh,  the  owners  of  the 
'Sunset'  line  have  hedged  California  in  with  railroads  and  by  reason 
of  its  local  influences  there  is  able  to  control  the  business."  Very  well. 
Let  the  Canadian  line  come  down  into  California  and  build  about  3500 
miles  of  road;  develop  virgin  territory;  open  it  up  to  the  outside  world; 
invest  money  for  which  it  has  to  look  thirty-five  to  fifty  years  beyond  in 
expectation  of  a  return.  Do  not  let  it  come  and  say:  "Because  you  have 
done  this,  because  you  have  made  this  business,  at  this  great  expense  to 
yourself,  and  it  is  there,  you  have  got  to  give  me  a  share  of  it." 

Now,  one  word  more  and  I  will  close.  I  insist,  in  the  name  of  the 
American  lines,  that  back  of  this  whole  demand  of  the  Canadian  line, 
behind  it  and  underneath  it,  there  is  nothing  that  gives  it  any  force  in 
the  mind  of  the  Vice-President  of  the  Canadian  line,  any  more  than  it 
does  in  my  mind,  or  any  more  than  it  does  in  the  mind  of  this  Board, 
than  the  unconfessed  but  existing  consciousness  that  if  you  do  not  give 
them  this  money  advantage,  they  can  come  in  and  will  come  in  and 
destroy  this  traffic.  If  it  were  not  for  that  condition  of  things,  the  Cana- 
dian line  never  would  have  asked  for  a  differential.  Why  does  it  work 
upon  an  equality  up  here  in  Oregon  with  the  American  lines?  It  is  the 
more  amazing  to  me  since  I  got  some  information  from  Mr.  Kerr's  state- 
ment of  his  relations  with  the  Northern  Pacific  road.  He  says  he  cannot 
work  in  over  the  Northern  Pacific  to  Portland.  I  know  he  does  business 
to  Portland,  for  I  was  present  at  the  hearing  of  the  Inter-state  Commerce 
Commission  held  in  Portland  not  more  than  a  year  ago,  and  heard  it  tes- 
tified to  from  the  stand  there,  that  shippers  did  use  the  Canadian  line  into 
Portland.  Did  he  run  it  around  by  steamer?  I  took  it,  as  a  matter  of  fact, 
that  he  went  in  over  the  Northern  Pacific  line.  I  did  not  know  how  else 
he  could  get  there.  He  works  upon  an  equality  there.  Perhaps  he  does 
not  do  much  Portland  business.  He  says  he  does  not  do  much  Tacoma, 
but  gets  into  Seattle  by  traffic  arrangement  with  the  Seattle  &  Interna- 
tional Ry.  Now,  there  must  be  some  subsisting  arrangement.  I  do  not 


198 

know  but  it  may  be  that  this  line  has  a  traffic  arrangement  with  respect 
to  Vancouver;  an  understanding  that  if  the  Great  Northern  and  Northern 
Pacific  will  keep  out  of  Victoria  and  Vancouver  it  will  keep  out  of  Tacoma 
and  Seattle.  I  do  not  know  that  that  is  the  case,  but  that  is  the  only 
reason  that  I  can  think  of.  As  I  have  said  before,  if  you  will  just  reverse 
conditions,  and  that  is  the  test,  I  do  not  care  what  is  said;  what  argument 
is  made  beyond  that.  Picture  in  your  minds  San  Francisco  with  the 
State  of  California  back  of  it  up  here  (indicating  on  map)  at  Vancouver; 
Vancouver  down  here  at  San  Francisco  with  British  Columbia  at  the 
back  of  it,  all  these  rail  lines  existing  just  as  they  do  today,  would  the 
Canadian  Pacific  be  here  asking  for  a  differential  in  order  to  get  into 
Vancouver,  any  more  than  we  are  asking  a  differential  to  get  into  Van- 
couver today?  Why  are  they  here?  Because  here  (pointing  on  map  to 
San  Francisco)  is  a  great  volume  of  business  that  they  did  not  create,  nor 
contribute  towards  its  creation.  They  do  not  support  it  nor  sustain  it, 
never  will  assist  to  support  and  sustain  it  until  they  do  as  they  ought, 
build  a  road  down  into  that  territory,  (pointing  to  map)  then  they  will 
not  be  like  the  Chinaman,  they  will  build  up  American  territory  and 
American  industry;  they  will  contribute  to  the  trade  of  San  Francisco; 
they  will  open  up  new  territory;  they  will  have  a  right  to  some  share 
in  it,  but  they  do  not  do  that.  This  trade  is  made  by  others,,  sustained 
by  others,  and  they  come  in  and  say,  "We  want  a  share  in  that,  we  have  a 
right" — that  is  what  they  say — "we  are  entitled  to  it."  We  say,  "You 
have  not  that  right."  What  is  their  right  founded  on?  The  mere  position 
that  they  occupy,  of  being  able  by  reason  of  the  comparative  barrenness 
of  population  of  their  country  west  of  Winnipeg,  by  reason  of  the  small 
business  interests  up  there,  to  reduce  rates  at  San  Francisco  and  destroy 
the  value  of  that  business  to  the  American  lines,  and  by  so  doing  destroy 
the  value  of  intermediate  and  dependent  business.  If  they  did  not  Have 
tliat  power  they  would  not  be  here;  if  they  were  not  conscious  of  that 
power  they  would  not  be  here.  Now,  we  hold  that  to  be  the  underlying 
reason  in  this  case  and  that  this  is  not  a  question  of  expediency — not  a 
question  of  whether  we  will  make  more  money  by  trading  with  them  than 
we  will  by  not  trading  with  them — also  that  that  is  the  form  that  all 
these  differentials  in  this  territory  (pointing  on  map  to  Central  Freight 
and  Trunk  lines)  take; — that  they  are  mere  questions  of  expediency. 
The  Trunk  Lines  accede  to  differential  demands  so  as  to  stop  the  demor- 
alization of  rates.  Analyze  the  statement  of  the  other  side  and  get  down 
to  the  under  side  of  it,  and  you  will  find  that  their  own  testimony  veri- 
fies what  I  say.  We  do  not  acknowledge  the  question  of  expediency.  We 
are  here  to  determine  the  question  whether  they  are  entitled  to  a  share  of 
this  business  if  they  can  get  it  only  by  a  money  advantage,  and  they  are 
here  under  the  submission  to  prove  that  right.  We  are  not  obliged  to 
prove  that  they  do  not  have  it.  It  is  their  business  to  prove  that  they  have 


199 

it,  and  necessarily  in  that  aspect  of  the  question,  the  whole  range  of  the 
argument  that  the  American  lines  submitted  seems  to  us  to  be  germane. 
I  am  obliged  to  the  Board  for  this  attention. 


ARBITRATOR  WASHBURN— Mr.  Shaughnessy,  if  you  desire  to 
make  any  further  remarks  on  this  subject  confining  yourself  to  Mr. 
Stubbs'  argument,  you  may  do  so. 

MR.  SHAUGHNESSY— I  shall  say  but  a  very  few  words  because 
there  was  nothing  in  Mr.  Stubbs'  remarks  today,  I  think,  that  are  not 
practically  a  portion  of  his  previous  address  to  the  Board. 

There  are  only  two  points  that  I  consider  of  sufficient  importance  to 
deserve  an  answer,  and  the  first  of  those  points  is  the  very  last  that  he 
made,  that  the  Canadian  Pacific  comes  here  practically  with  a  threat 
that  unless  the  American  lines  accord  to  them  what  they  demand,  they  are 
in  a  position  and  they  will  utilize  that  position  to  destroy  the  rates  to 
San  Francisco,  and  Mr.  Stubbs  asks  if  it  was  not  for  this  fact,  would  they 
be  here  today.  Why,  Mr.  Chairman,  if  that  is  the  fact,  would  we  be  here 
today?  Would  we  at  the  Denver  meeting  have  acceded  to  this  arbitra- 
tion? Would  we  not  have  said  to  the  gentlemen,  we  have  that  differ- 
ential and  we  will  keep  it?  If  that  was  the  policy  of  the  Canadian  Pacific, 
and  no  one  knows  better  than  Mr.  Stubbs  that  that  is  not  its  policy — 
no  one  knows  better  than  Mr.  Stubbs  that  in  relation  to  a  forced 
policy  of  that  kind,  whenever  one  is  attempted,  it  originates  not  with  the 
Canadian  Pacific  but  frequently  with  some  of  the  gentlemen  connected 
with  the  Southern  lines — I  will  not  except  the  Southern  Pacific  from  it. 
The  fact  that  the  Canadian  Pacific,  is  here  today  and  is  submitting  its  case 
to  you — stating  to  you  that  it  only  asks  in  dealing  with  this  question, 
that  you  should  act  towards  the  Canadian  Pacific  route,  not  the  Cana- 
dian Pacific  Railway,  but  to  the  route,  with  the  same  consideration  that 
you  would  to  a  road  existing  anywhere  in  the  United  States;  deal  with 
it  in  exactly  the  same  way  as  if  the  Canadian  Pacific  was  an  American 
line  and  not  a  Canadian  line.  I  say  the  fact  that  we  come  to  you  and 
submit  our  case  to  you  is  the  very  best  evidence  that  Mr.  Stubbs' 
allegation  that  we  are  attempting  to  force  something  has  no  foundation  in 
fact  whatever. 

Now,  one  further  point.  Mr.  Stubbs  refers  to  the  Northern  Pacific 
and  says  that  they  have  built  lines  up  into  the  Winnipeg  country  com- 
peting for  strictly  Canadian  domestic  traffic  and  he  says  that  the  North- 
ern Pacific  by  competing  with  the  Canadian  Pacific  does  so  on  exactly 
the  same  footing. 

MR.  STUBBS — No,  I  did  not  say  that  was  the  case.  I  asked  you 
the  question. 


20O 

MR.  SHAUGHNESSY — I  beg  your  pardon,  I  will  answer  the  ques 
tion;  they  do.  The  Northern  Pacific  Company  makes  exactly  the  same 
rate  from  Toronto  or  Montreal  as  the  Canadian  Pacific  makes,  both  hav- 
ing all-rail  lines  to  Winnipeg,  but  on  business,  rail  to  Owen  Sound  and 
by  water  to  Port  Arthur,  thence  via  rail  to  Winnipeg,  if  the  Canadian 
Pacific  uses  its  rail-and-lake  route,  it  makes  a  lower  rate  and  the  Northern 
Pacific  consents  to  it  and  the  Canadian  Pacific  reciprocates  by  giving  to 
the  Northern  Pacific  the  right,  if  it  takes  business  by  its  lake-and-rail 
route  from  any  point  in  Canada  to  Duluth — it  reciprocates  by  permitting 
them  to  make  a  lower  rate.  Now,  if  the  conditions  were  the  same;  if  we 
had  this  all-rail  line,  to  which  Mr.  Stubbs  referred,  to  San  Francisco,  and  if 
we  were  in  as  good  a  position  to  enable  us  to  do  an  all-rail  business  as  the 
Southern  Pacific,  I  readily  grant  it  would  be  absurd  for  us  to  come  here 
and  ask  you  to  concede  us  a  differential — it  would  be  absurd,  but  we  must 
take  the  road  as  it  is  today — a  combined  rail  route  and  a  water  route, 
and  from  that  standpoint  we  consider  it  just  as  the  other  roads  of  a  sim- 
ilar character  are  considered  throughout  the  United  States. 

I  know  of  nothing  else  that  I  care  to  say — there  is  one  matter,  but  I 
think  it  was  probably  an  error  on  the  part  of  Mr.  Stubbs — I  did  not 
say,  or  at  least  I  did  not  intend  to  say,  with  reference  to  the  rights  of 
the  Canadian  Pacific  in  this  country,  as  stated  bv  Mr.  Stubbs.  What  I 
intended  to  say  was,  that  the  Canadian  line  had  the  same  right  and  priv- 
ileges with  reference  to  traffic  in  bond  that  United  States  roads  have  in 
Canada  with  reference  to  bonding. 

That  is  our  case. 


ARBITRATOR  WASHBURN— The  hearing  is  closed,  and  the 
Board,  after  giving  the  matter  proper  and  conscientious  consideration, 
will  render  its  decision.  We  stand  adjourned. 

At  12:45  P-  M.  the  Board  adjourned, 


2OI 


DECISION 

OF 
BOARD  OF  ARBITRATION. 


The  following  is  a  copy  of  the  decision  rendered  by  the  Board: 

Chicago,  October  19,  i 
J.  C.  Stubbs,  Esq., 

Representing  the  United  States  Lines. 

T.  G.  Shaughnessy,  Esq., 

Vice  President,  Canadian  Pacific  Railway  Co. 

GENTLEMEN:— 

The  undersigned  who  were  appointed  Arbitrators  under  the  following 
resolution  adopted  at  a  meeting  of  interested  lines  which  convened  at 
Brown  Palace  Hotel,  Denver,  Colorado,  August  22nd,  1898,  viz.: 

"RESOLVED,  That  provided  the  Canadian  Pacific  Railway 
will  join  with  the  United  States  Lines  in  a  co-operative  agreement 
designed  to  secure  the  maintenance  of  reasonable  rates  on  the 
freight  traffic  interchanged  with  San  Francisco,  CaL,  by  other 
points  in  the  United  States  and  Canada,  that  the  lines  here  repre- 
sented will  submit  to  arbitration  the  question  of  whether  the 
Canadian  Pacific  Railway  is,  or  should  be  entitled  to  a  differential 
under  the  rates  made  by  the  United  States  lines  for  the  carriage  of 
the  freight  in  question,  and  if  any  differentials,  what  those  differen- 
tials shall  be.  The  Board  of  Arbitration  to  consist  of  three  mem- 
bers; one  to  be  selected  by  the  Canadian  Pacific  Railway,  one  to  be 
selected  by  the  American  lines  interested,  they  two  to  select  a  third 
and  that  the  decision  of  two  members  of  said  Board  of  Arbitration 
shall  be  final,  conclusive  and  binding  upon  all." 

after  hearing  the  evidence  and  arguments  of  the  interested  parties  and 
having  duly  considered  the  same,  respectfully  submit  their  decision  as 
follows : 

The  Canadian  Pacific  Railway  is  not  nor  should  it  be  entitled  to  a 
differential  under  the  rates  made  by  the  United  States  lines  for  the  car- 
riage of  the  freight  in  question. 

Signed:     Edw.  S.  Washburn 

W.  A.  Day 
I  do  not  concur  in  the  above  conclusion; 

Signed:     J.  W.  Midgley. 


3  YL'K 


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